European shares sag as Eutelsat and Drax drop
* Eutelsat and Drax slump after broker downgrades
* But cost cutting plans lift Telecom Italia shares
* Morgan Stanley raises "defensive" stocks to overweight (ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). Adds details, updates prices)
By Danilo Masoni
MILAN, May 16 (Reuters) - European shares fell on Monday with satellite operator Eutelsat and power station company Drax slumping after broker downgrades.
Leading investment bank Morgan Stanley also advised investors to stick with "defensive" stocks, namely those with solid dividends and cashflow, given signs that the market environment would remain difficult for this year.
The pan-European FTSEurofirst 300 index was down 0.4 percent. Volumes were thin with the German and Swiss markets closed for a public holiday.
Eutelsat, which plunged 27.6 percent on May 13 after the company cut its outlook, dropped a further 7 percent on Monday after Morgan Stanley cut its rating on the stock to "underweight" from "equal weight".
Drax also fell sharply after Bernstein issued a similar downgrade on the stock. Continuación...