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* FTSE 100 down 0.6 pct
* Sterling at 3-week low
* Royal Mail issues profit warning
* Nafta deal boost fades
LONDON, Oct 2 (Reuters) - UK shares retreated on Tuesday asthe positive impact of a deal on North American free trade fadedglobally and shares of Royal Mail hit a record low theday after the 500-year-old postal service issued a profitwarning.
At 0909 GMT, the benchmark FTSE 100 was losing 0.6percent at 7,460.75 points but outperforming continental indexeshit by concerns over Italy's 2019 budget.
Britain's listed blue chips failed to receive an accountingboost from the pound falling to a three-week low, with investorsgrowing anxious about a conflict over Prime Minister TheresaMay's Brexit plan.
Weighing on the British stock market was Royal Mail,which lost 8.3 percent and was trading at 360.4 pence, itslowest level since it was listed in London in 2013.
"We have been bearish on the outlook for productivityimprovements, but yesterday's profit warning was shocking in itsscale and timing," Liberum analyst Gerald Khoo said.
Shares of the company, founded under Henry VIII, plunged 18percent on Monday after it warned its shareholders annualprofits would be far lower than expected, hurt by erodinglogistics business margins and weaker letter volumes.
Ferguson was another big loser, down 4.9 percent,after the distributor of plumbing and heating products saidorganic revenue growth in September fell and warned ofchallenging UK markets.
Uncertainty was still palpable in the travel sector afterRyanair's profit warning on Monday.
Easyjet was down 3 percent and among smallercompanies, Thomas Cook fell 7.3 percent after bothgroups' prospects were cut by brokers.
Oil majors were a rare sector of gains with U.S. oil priceshitting their highest level since November 2014 as marketsprepared for tighter supply once U.S. sanctions against Irankick in next month.
BP and Royal Dutch Shell were up 0.5 percentand 0.3 percent respectively.(Reporting by Julien Ponthus; Editing by Jon Boyle)
