(For a live blog on European stocks, type LIVE/ in an Eikonnews window)
* FTSE 100 down 0.1 pct
* BoE seen keeping rates on hold
* Morrisons drops despite strong update
* RBS gains on special div prospect
By Danilo Masoni
MILAN, Sept 13 (Reuters) - The UK's top share index edgedlower on Thursday ahead of a Bank of England meeting at whichinterest rates are set to be kept on hold, while retailers weremostly lower as investors reacted unfavourably to an update fromsupermarket group Morrisons.
The FTSE 100 was down 0.2 percent by 0859 GMT, as apull-back in oil and tobacco stocks, which had pushed up theindex in the previous session, more than offset gains in banksand materials.
Economists polled by Reuters all expect the BoE, whichraised rates last month, to vote 9-0 to leave them at 0.75percent. Most do not predict a further rate rise until afterBritain leaves the European Union in March 2019.
"Following August's hike it is likely to be a completelyforgettable get-together, with it being hard to see the newlyre-signed Mark Carney and his colleagues doing anything to shakethe markets," Connor Campbell, analyst at Spreadex, said.
Sterling, holding steady near one-month highs, also weighedon shares in big international exporters, which are heavilyrepresented on the index.
Marks & Spencer was the leading loser on the FTSE,down 2.6 percent, while Morrisons fell 1 percent despite itsfirst-half profit growth beating forecasts and a quarterly salesperformance that was its best in nine years.
Some analysts were concerned about pressure from low-costcompetitors, arguing the strong update was a one-off.
"The question now is where can Morrisons go from here? Thereremains some intense pressure from discounters, whilst Tesco haslately announced its own discount chain aimed at countering theGerman upstarts. Further pressure on margins seems inevitable,"said Neil Wilson, analyst at Markets.com.
Other retailers were also under pressure on a negativeread-across from poor results from the country's biggestdepartment store group John Lewis, whose profit was wiped out inthe first half as it was forced to match discounting by itsstruggling rivals on a fiercely competitive high street.
Ocado, which rose 2 percent, was an exception.
Small cap Debenhams fell 6.9 percent after SportsDirect ruled out a bid for the department storeoperator.
Banks provided some support to the FTSE, with shares inRoyal Bank of Scotland up 1.5 percent as its chairmanwas reported as saying the lender could pay a special dividend.HSBC and Barclays also rose.
Miners were also in demand as copper prices rallied after aU.S. official said Washington had invited Beijing to restarttalks aimed at resolving their trade dispute.(Reporting by Danilo Masoni; editing by John Stonestreet)
