UPDATE 1-Shares in French retailer Casino rally after Amazon deal

* Deal follows months of speculation in French retail sector

* Monoprix-Amazon seen similar to Amazon-Morrisons deal

* Shares surge, move seen as paving way for bigger tie-up(Adds analysts comments, Monoprix boss comment, background)

By Dominique Vidalon and Sudip Kar-Gupta

PARIS, March 27 (Reuters) - Shares in Casinosurged on Tuesday after its Monoprix chain agreed to sellproducts via Amazon in its first such partnership inFrench food retail.

Amazon's purchase of Whole Foods Market Inc for $13.7billion last year had raised expectations that it would bid fora French retailer or form a partnership in France along thelines of a deal in which Amazon Prime has been selling productsfrom British supermarket chain Morrisons.

Shares in supermarket operator Casino were up 4.1 percent at39.10 euros by 0845 GMT, as some traders and analysts speculatedthat the initial partnership with Amazon could lead to a biggerdeal later on.

Casino and Amazon said late on Monday that groceries sourcedfrom Monoprix will be available in the Amazon Prime Now app andwebsite through a dedicated virtual store.

Asked if this partnership paved the way to other deals withAmazon, Monoprix CEO Regis Schultz told Reuters: "We will havethe opportunity to talk about it".

Monoprix is one of France's best-known store chains, with anetwork of nearly 800 upmarket stores in more than 250 Frenchcities, and a key profit contributor to the Casino group.

"Capital light and profitable growth for Monoprix. Monoprixbecomes a marketplace offer on Amazon Prime Now," said Bernsteinanalyst Bruno Monteyne.

"Monoprix does the picking in store of the order. Amazontakes care of all deliveries. The deal structure seems similarto the Morrisons deals," he added.

Casino's deal with Amazon also follows a deliverypartnership signed last year with UK online retailer Ocadowhich will be operational before the end of next year.

Since the purchase of Whole Foods Market Inc, expectationsthat Amazon could focus next on Europe have spurred Frenchretailers to try to improve their own online offerings.

Leclerc, France's biggest food retailer by market share,privately held operator Systeme U and Casino were all linked inrecent months with Amazon, which has steadily been building itspresence in France.

Leclerc launched its own home delivery service in Paris onMonday.

"Since the deal with Ocado will not start working until2019, Casino needs to protect Monoprix from Leclerc, whichstarted home delivery in Paris," wrote Kepler Cheuvreuxanalysts.

Amazon has made no secret of its desire to launch a grocerydelivery service in France, but a major, full-scale deal betweenAmazon and a French retailer has yet to materialize.

Amazon has, however, made small forays in that direction andthe U.S company has been steadily building up its presence inFrance, where it has run its Amazon Prime express deliveryservice in Paris since 2016.($1 = 0.8019 euros)(Reporting by Dominique Vidalon and Sudip Kar-Gupta;Additional reporting by Pascale Denis and Blandine Henault)