* FTSEurofirst 300 index closes flat
* Cost-cutting plans lift Telecom Italia shares
* Eutelsat, Drax slump after broker downgrades
* German and Swiss markets shut for holiday
* 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 ended steady on Monday, having recouped early losses, as stronger mining stocks offset weakness elsewhere, with Telecom Italia a standout gainer on the back of its cost-cutting plans.
The pan-European FTSEurofirst 300 index, which had fallen as much as 0.6 percent, ended flat. Volumes were thin with the German and Swiss markets closed for a public holiday.
Gains in mining stocks, which rose on the back of firmer metals prices, supported the broader market, while miner Anglo American also benefited from an upgrade by Bank of America Merrill Lynch.
Telecom Italia rose 3 percent, as investors welcomed a move by Italy's biggest telecoms group to more than double the cost cutting target in its new business plan.
"The positive surprise on cost savings would justify a double-digit share price performance," Banca Akros analyst Andrea De Vita said.
However, Eutelsat - which plunged 27.6 percent on May 13 after the company cut its outlook - dropped a further 6.8 percent after Morgan Stanley cut its rating on the stock to "underweight" from "equal weight".
Drax also fell by 6.8 percent after a Bernstein downgrade.
The FTSEurofirst is down by about 9 percent so far in 2016, with global stock markets affected by concerns over weakness in China, the world's second-biggest economy.
Doubts about whether China's economy is stabilising resurfaced over the weekend when data showed investment, factory output and retail sales in the country all grew more slowly than expected in April.
Morgan Stanley said in a note that the uncertain outlook meant it was a good time to favour defensive stocks.
"Although we have been cautious on European equities for the last six months, we have not been positive on 'Defensives' as we found them both overbought and expensive," Morgan Stanley strategists said.
"Although the latter issue has not improved materially, the group's underperformance creates a more attractive entry point, we believe, in the face of a tricky market environment this year," they said.
Today's European research round-up
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Mike Dolan, Markets Editor EMEA. (Additional reporting by Sudip Kar-Gupta; Editing by Louise Ireland)