Britain's FTSE underperforms euro zone as commodity shares drop

* FTSE 100 down 0.1 pct

* New (KOSDAQ: 160550.KQ - news) signs of Chinese economic weakness impact miners

* HSBC leads banks lower as pressure builds over Swiss unit

* Tesco (Xetra: 852647 - news) up as grocers see sales improvements

(Updates with closing prices)

By Alistair Smout

LONDON, Feb 10 (Reuters) - Britain's top equity index

drifted lower on Tuesday, hit by a drop in banks and commodity

stocks, although improved sales for battered supermarkets lent

support to the market.

Fresh signs of economic weakness in China, the world's

biggest consumer of metals, hit mining companies, with the FTSE

350 Mining Index down 2.8 percent.

Data on Tuesday showed China's annual inflation fell to a

five-year low in January and factory deflation worsened.

Concern over weakening demand from China weakened oil and

gas stocks, which fell 2.8 percent. The price of

Brent crude fell below $58 a barrel as the International Energy

Agency (IEA) predicted supply may hit a record high despite

subdued demand.

"The weakness in the price of oil is not purely down to

excess supply. The weakness we're seeing in macro data, in China

and elsewhere suggests there is a demand aspect to this, too,"

said Jeremy Batstone-Carr, market analyst at Charles Stanley (LSE: CAY.L - news) .

In all, mining and energy stocks combined to trim over 30

points off the FTSE 100, which closed down 8.03 points,

or 0.1 percent.

It underperformed the euro zone's EuroSTOXX 50,

up 1 percent, which benefited from its low exposure to commodity

stocks as well as a rally in Greek assets.

Greek stocks extended gains after several press reports

pointed to a possible debt agreement between Greece and its

creditors, with one report citing a six-month debt extension.

Royal Mail (LSE: RMG.L - news) declined by 4.8 percent -- the worst performing

FTSE stock in percentage terms -- after investment bank JP

Morgan (Other OTC: MGHL - news) cut its rating to "neutral" from "overweight".

Grocers provided some support to the market, however, after

Kantar trade data showed that Tesco posted its first

sales growth in a year.

Britain's biggest supermarket rose 3.6 percent, although it

remains down over 25 percent since the beginning of 2014.

Wm Morrison rose 3.4 percent after posting its best

sales since December 2013. Marks & Spencer (Other OTC: MAKSF - news) rose 4.9

percent, making it the index's top gainer, after brokerage RBC

upgraded the stock to "outperform" from "sector perform".

(Editing by Larry King)