* Sterling steady against euro, dollar

* Markets assess new fin min Healey

* Healy appointed late Monday in surprise move

(Edits paragraph 1, adds comments in paragraphs 5, 15 and 16)

By Stefano Rebaudo and Yoruk Bahceli

July 21 (Reuters) - Sterling was broadly steady and UK gilts

recovered some ground on Tuesday after John Healey was appointed

as Britain's new finance minister, with investors awaiting fresh

signals on the government's fiscal policy.

The pound trimmed early gains against the dollar and was last

trading at around $1.34 , little changed on the day. It

was also broadly steady against the euro, which traded at around

85 pence.

The appointment of Healey, a former defence secretary, was

announced after the close of UK markets on Monday. Healey had

not been seen as a leading candidate for the key role.

He will now have to find more money to invest in key areas such

as defence and speed up a slow economy while reducing the

welfare bill, all while fulfilling new Prime Minister Andy

Burnham's pledge to stick within the fiscal rules.

"Initial (muted) reactions suggest the market is viewing Healey

as a relatively safe pair of hands compared with some

alternatives, with his Treasury experience and reputation for

message discipline likely helping to reassure investors

following Monday's fiscal concerns," said Evelyne Gomez-Liechti,

multi-asset strategist at Mizuho.

British borrowing costs rose on Monday and sterling dipped as

investors fretted over Burnham's early remarks on becoming prime

minister that he would use any flexibility within the

government's fiscal rules, reigniting concerns about a possible

loosening of fiscal policy.

UK 10-year gilt yields dipped 1.5 basis points (bps) to 5.01%

, after jumping 8 bps above 5% the day before. They

rose to around 5.05% in mid-July, their highest level since May

20.

Yields on 30-year bonds, more sensitive to fiscal

concerns, were last down 1.5 bps to 5.73% after climbing on

Monday to their highest since May.

"Stabilisation in the bond market is needed for the pound to

fully regain its strong momentum," ING currency strategist

Francesco Pesole said.

London-listed defense stocks meanwhile rose on Tuesday,

outperforming European peers, following Healey's appointment.

Healey resigned in June from the government led by Keir Starmer,

who has been replaced by Burnham. Healey had said the finance

ministry had been "unwilling" to find the money to keep the

country safe.

Analysts said the latest UK economic data was positive for the

new finance minister by suggesting the Bank of England may have

room to ease interest rates over the next year.

British annual wage growth held at 3.4% in the three months to

May, matching economists' forecasts.

UK public borrowing declined to £16 billion ($21.5 billion) in

June, driven by stronger tax receipts and weaker spending,

including lower inflation-linked debt payments.

Early on Tuesday, the government announced it would cut taxes on

electricity bills, as Burnham attempts to deliver on his

promises to ease a cost-of-living crisis.

"The new Chancellor has already announced that the government

will abolish VAT on energy bills, but as it was only charged at

5% this will cost little," Berenberg economist Andrew Wishart

said.

"The small scale of the giveaway and Healey's commitment to

meet the existing borrowing rule with a buffer against global

uncertainty should comfort bond investors," he added.