European shares weighed by BT, utilities; Italy stocks slide

* STOXX down 0.1 pct at close; Italy's FTSE MIB slides

* BT drops after disappointing results

* RBS (LSE: RBS.L - news) rallies after U.S. settlement

* Political jitters hit Italy's FTSE MIB (Adds detail, updates prices at close)

By Danilo Masoni and Kit Rees

MILAN, May 10 (Reuters) - European shares pulled lower on Thursday, weighed down by losses in BT following a disappointing update and weakness among utilities stocks, while political jitters hit Italian stocks.

The banking sector was a bright spot, however, with gains in RBS following a multi-billion dollar deal to settle a U.S. investigation of the bank's bond sales, and a solid update from Italy's biggest bank UniCredit (EUREX: DE000A163206.EX - news) helping limit losses on the pan-European STOXX 600, which ended just 0.1 percent lower.

BT shares fell more than 7 percent after saying it was cutting 13,000 jobs, the latest attempt by Britain's biggest telecoms group to rebuild after an accounting scandal and a downturn in trading.

Traders said its latest update showed a disappointing guidance, while Jefferies analysts highlighted that the company missed out on the opportunity of announcing a bolder move of fiber roll out, while job cuts were bigger then expected.

"No evidence of inflection in results or mindset," said Jefferies.

RBS rallied 3.8 percent after it agreed to pay a smaller-than-expected $4.9 billion to resolve a U.S. investigation into its sale of mortgage-backed securities.

Analysts, who had estimated the U.S. could impose a fine of up to $12 billion, said the bank could reinstate a dividend.

Gains in RBS helped the UK's FTSE rise 0.5 percent, outperforming other European bourses after the Bank of England's decision to keep rates on hold sparked a drop in sterling.

Still in banks, UniCredit rose 1.8 percent after it posted its best first-quarter result since 2007, topping forecasts with a 1.1 billion euro net profit thanks to lower-than-expected loan losses.

Italy's FTSE MIB fell 1 percent as bond yields jumped on an increased possibility that a government of anti-establishment parties will take power.

Some of the biggest movers on the STOXX also included precious metals miner Randgold, down 7 percent after its quarterly profit fell, while Next (Frankfurt: 779551 - news) rose more than 6 percent after a strong outlook and trading update.

Utilities were a weak spot, down 0.9 percent to lead sectoral losers in Europe, weighed by a disappointing update at Italy's Enel (LSE: 0NRE.L - news) .

Oil stocks took a breather after hitting their highest level in more than 3-1/2 years in the previous session after the price of oil jumped on the back of the U.S. quitting a nuclear deal with Iran. The sector ended the day 0.9 percent lower. (Reporting by Danilo Masoni and Kit Rees; Editing by Toby Chopra)