* FTSEurofirst 300 up 0.6 pct
* Italian banks outperform on hopes of a state plan
* Nestle lower as shares go ex dividend
* SAP recovers after mixed update (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)
By Danilo Masoni and Alistair Smout
MILAN/LONDON, April 11 (Reuters) - European shares rose on Monday, reversing earlier losses thanks in part to gains in Italian banks and mining stocks.
The pan-European FTSEurofirst 300 index was up 0.6 percent at 1,311.61 points by 1348 GMT, after advancing 1.2 percent in the previous session. In spite of the gains the index is down almost 9 percent so far this year.
The Italian banking sector index rose sharply for a second straight session on hopes the Rome government will soon thrash out a plan to set up a state-backed fund to buy bad loans and plug capital shortfalls.
"(There) seems to be a reaction to central bank news surrounding the creation of a recapitalisation fund in Italy to shore up the banks," said James Helliwell, Head of Markets, Lex van Dam Trading Academy.
"The news has been received positively following ongoing concern around the risks within the European banking sector."
Shares in Monte dei Paschi rose 11.6 percent, while UniCredit and Intesa Sanpaolo, the country's two biggest lenders, climbed 4.5 and 3.3 percent respectively.
Gategroup soared by 16.6 percent, boosted after China's HNA Group made an agreed offer for the Swiss airline catering group.
The STOXX 600 Basic Resource index rose 2.9 percent, making it the biggest sectoral gainer, after copper climbed on Monday from near its lowest in more than a month after middling U.S. wholesale inventories bruised the dollar.
Shares in Anglo American, Glencore and Rio Tinto were all up more than 2 percent.
A weaker dollar makes commodities cheaper for buyers holding other currencies.
Telecom firm Telenor rose 4.5 percent after a report that it was trying to sell its Indian unit.
SAP fell as much as 2.6 percent after the company warned that first-quarter results would be weaker than expected due to slower sales of software licenses to corporate customers, particularly in Brazil and the United States.
However, it recovered to trade up 0.2 percent, with analysts highlighting bright spots in the report.
"Despite the fact that SAP missed expectations, (it) performed quite well compared to its peers in terms of profitability," analysts at DZ Bank said in a note.
Food company Nestle fell 3 percent, topping losers on the FTSEurofirst, as its shares went ex-dividend.
Shares in Daily Mail & General Trust were broadly flat after the Wall Street Journal reported that the parent company of Britain's Daily Mail newspaper was in talks with several private equity firms about a possible bid for Yahoo Inc .
Today's European research round-up
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Mike Dolan, Markets Editor EMEA. (Additional reporting by Sudip Kar-Gupta and Kit Rees; Editing by Mark Heinrich)