* FTSEurofirst 300 ends flat
* Italy's FTSE MIB down 0.9 percent
* UniCredit recommends Germany over Italy or Spain
By Toni Vorobyova
LONDON, March 4 (Reuters) - European equities finished a volatile session broadly flat on Monday after investors balanced fresh assurances of global central bank stimulus against some disappointing earnings and political uncertainty in Italy.
The pan-European FTSEurofirst 300 index closed flat at 1,168.36 points, recovering some poise in afternoon trade after Janet Yellen became the latest U.S. Federal Reserve official to reaffirm a commitment to its monetary easing policy for some time yet.
Italy's FTSE MIB, however, was a clear laggard, posting close to a three-month intra-day low and finishing 0.9 percent lower on signs that the country could be edging towards another election within months after polls ended in a stalemate last week.
"Short term, the uncertainty is dominating the equity market," UniCredit equity strategist Tammo Greetfeld said. "This period of heightened uncertainty will most likely persist for some time.
"The Spanish and Italian equity markets are most at risk from price setbacks, and investments should be focused on the German equity market, as this offers the best chance of continuing the positive development of the past several months."
Within sectors, Greetfeld recommended what he termed "stable growth", namely food and beverage, healthcare and personal and household goods.
Those were among the top performers on Monday, with gains of between 0.4 percent and 0.7 percent. Basic resources and banks, on the other hand, were the laggards.
The latter were hit by below forecast earnings at heavyweight HSBC, the shares of which fell 2.5 percent in more than double their usual daily volumes.
Among other things, HSBC said it was hit by falling market values in equities, which crimped its trading revenue. The low volumes have also been a key drag on equity markets as a whole, with trading activity on FTSEurofirst 300 last year nearly 40 percent below that of 2007, Thomson Reuters data shows.
Other heavy fallers included Belgian telecoms group Belgacom , Britain's Lloyds Bank and German retailer Metro. All extended post-results losses into a second session as the numbers filtered through into analyst downgrades.
With the 2012 earnings season in Europe nearly two thirds of the way through, 39 percent of STOXX 600 companies that have already reported have missed forecasts, prompting analysts to cut this year's views by an average of 1.6 percent in the past 30 days, according to Thomson Reuters Starmine.
The results have played a key part in stalling the June to January rally in European equity markets to multi-year peaks.
"The trouble is that the market rehabilitated itself, not the economy, so that's why we have latterly been rowing back on our shorter-term optimism on the European equity market," said Andrew Parry, chief executive of Hermes Sourcecap.
"It has been less and less about a sector effect and more and more about finding winners. It is now much more about a stock-picker's environment than it is about playing risk premiums and that sort of factor exposure."
Parry's picks include Swiss bank UBS and Swedish investment company Kinnevik.