European shares hold near five-year highs on Fed taper day
* FTSEurofirst 300 up 2.08 points at 1,254.71
* Fed stimulus wind down expected at 1800 GMT
* Economists sees $10 bln withdrawal - Reuters Poll
* Nokia rallies after Credit Suisse recommendation
By David Brett
LONDON, Sept 18 (Reuters) - Stock market investors were leaning towards the U.S. Federal Reserve doing no more than lightly trimming its economic stimulus programme on Wednesday, keeping European shares near five-year highs.
The FTSEurofirst 300 was up 2.08 points, or 0.2 percent at 1,254.71, by 0713 GMT, just 4 points off five-year closing highs hit on Monday.
The Fed decision will not come until after European markets close around 1800 GMT but has dominated trade for the past week. The bank is widely expected to announce it is paring back its $85 billion monthly purchases of bonds, with the latest Reuters poll showing economists expect only a $10 billion reduction, although there is speculation among traders it could now do even less.
Markets remain relatively calm with volatility - a crude gauge of investor fear - still near historic lows despite concerns over how the economy will perform once central banks begin scaling back their support.
Deutsche Bank strategist Jim Reid said that economic data, although improving, never quite gets consistently firm enough for the Fed to be able to accelerate the stimulus withdrawal, and he sees the Fed's balance sheet still expanding this time next year.
Fund managers too appear optimistic about the outcome of the Fed meeting. Demand for "put options" on the Euro STOXX 50 , used by managers to protect their portfolios against potential pull-backs, has been fading before September derivative contracts expire on Friday.
Atif Latif, director at Guardian Stockbrokers, said only a scaling back of stimulus above $15 billion, adding $5 billion in mortgage backed securities to the $10 billion cut in Treasuries purchases, would be negative for the market in the short term.
"Some investors are looking to switch to asset classes that will provide rising yield protection and with global equities still trading below historical averages we remain bullish," he said.
"A cyclical recovery remains on track and ... we take the view that even with a move lower (for equities) this continues to provide an attractive entry point," he said.
Technology companies rose sharpest on Wednesday with Norwegian handset maker Nokia the top riser up 2.5 percent after Credit Suisse upgraded the firm to "outperform" from "neutral".
"Nokia's (recent) transformative deal with Microsoft allows it to drive significant value creation from its vast patent portfolio," Credit Suisse said, increasing its target price to 6 euros from 4.80 euros, adding that could prove conservative.
Goldman Sachs' double-upgrade of Heidlebergcement to "buy" from "sell" lifted the firm's shares 2.2 percent.
Zara owner Inditex, the world's largest clothes retailer, rose 1.1 percent after saying sales at the start of the third quarter rose 10 percent.
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