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* Mercedes-Benz, HSBC, Allianz trade ex-dividend

* Nexi jumps on Q1 beat, buyback programme

* BESI rises after large hybrid bonding order

May 9 (Reuters) - Europe's benchmark index retreated on Thursday from a recent rally, with a handful of heavily weighted stocks trading ex-dividend, while shares of Spanish bank BBVA slumped after announcing a hostile takeover bid for smaller rival Sabadell.

The pan-European STOXX 600 edged 0.1% lower by 0830 GMT, after jumping 2.5% over the past four sessions and posting record closing highs for two straight days.

Britain's benchmark FTSE 100 was flat ahead of the Bank of England's policy decision later in the day. The central bank is expected to hold rates steady and likely take another step towards a rate cut, but will probably be cautious about signalling an imminent move.

Europe's STOXX 600 kick-started May on a positive note, after taking a breather from the record-breaking rally in April, owing to resilient earnings, the European Central Bank's indication of a likely June rate cut and ebbing Middle East tensions.

"The inflation data seem to be forwarding more convincingly in Europe than the U.S. ... We would expect that first rate cut from the ECB to be the start of a rate-cutting cycle," said UBS Global Wealth Management multi-asset strategist Kiran Ganesh.

Automobiles were the worst hit sector, down 1.2%, dragged by a 5.6% drop in Mercedes-Benz as the German automaker's stock was trading ex-dividend.

Top executives at BMW and Volkswagen have warned against imposing EU import duties on electric vehicles from Chinese automakers, saying it could upend the bloc's Green Deal plan and harm China-manufactured car-importing automakers.

Other key stocks that were trading ex-dividend and weighing on the STOXX 600 were HSBC and German financial services firm Allianz SE, down 3.7% and 4.6%, respectively.

As for major M&A developments, Spanish bank Sabadell jumped 3.8% after rival BBVA presented a 12.23-billion-euro takeover bid directly to shareholders, even though the former's board already rejected the proposal.

With BBVA shares down 5.8%, Spain's benchmark index lost 1.2% to lag its regional peers.

On the earnings front, Belgian drug developer argenx lost 9.2% following its first-quarter earnings.

Italian payments group Nexi jumped nearly 6% after a larger-than-forecast rise in first-quarter core profit.

BE Semiconductor Industries climbed 4.7% after announcing it received order for 26 hybrid bonding systems.

"It's been relatively good so far on the earnings side and some of it seems to be filtering through into a more positive corporate outlook," said UBS Global's Ganesh.

At least 61% of the STOXX 600 companies that reported their first-quarter earnings have exceeded estimates, versus the typical 54% beat rate, according to LSEG data on Tuesday.

(Reporting by Ankika Biswas in Bengaluru; Editing by Nivedita Bhattacharjee and Sherry Jacob-Phillips)