* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 down 0.05 pct
* Low trading volumes ahead of Fed, ECB
* Recent sharp rally vulnerable if ECB disappoints
* Nokia stock surges on Lenovo takeover talk
By Blaise Robinson
PARIS, Aug 1 European shares were steady around
midday on Wednesday as investors waited to see if policymakers
would back up pledges to support the euro zone with decisive
measures such as buying bonds of troubled countries to lower
their borrowing costs.
Shares in Nokia jumped as much as 17 percent in
brisk volumes, with traders and analysts citing market talk that
Chinese PC maker Lenovo may be interested in the
struggling Finnish cellphone maker, before surrendering a big
chunk of the gains after a Lenovo official denied the rumour.
At 1100 GMT, the FTSEurofirst 300 index of top
European shares was up 0.1 percent at 1,064.40 points in low
volumes. The euro zone's blue chip Euro STOXX 50
index was down 0.05 percent at 2,326.30 points, testing for a
third day in a row a key resistance level, the 50 percent
retracement of the market's slump from mid-March to early June.
"Crossing the level on Monday hasn't triggered an
acceleration of the rally. We're getting 'buy' signals on a
number of industrial stocks such as Lafarge, but for
indexes, the trend is quite 'neutral' at the moment," TradingSat
chartist Vincent Ganne said.
"With the past week's violent rally, no one wants to play
this market on the downside, yet people are reluctant to take
big positions on the upside because of the high level of
Comments by European officials including ECB chief Mario
Draghi have raised expectations the bank will announce steps to
lower the borrowing costs of indebted Spain and Italy when it
meets on Thursday, triggering a sharp recovery rally in stocks.
But Bundesbank head Jens Weidmann poured cold water on hopes
for a bold move, saying in an interview given in late June and
just published that governments overestimate the central bank's
capacities and place too many demands upon it.
Germany also continues to resist giving the euro zone's
future ESM rescue fund a banking licence that would allow it to
borrow from the ECB to fund government bond purchases.
After Europe closes on Wednesday, the Fed is expected to
show it is ready to act as the U.S. economy weakens but should
stop short of aggressive measures such as a new round of
quantitative easing while keeping the door open for such a move.
The Euro STOXX 50 has jumped nearly 10 percent since Draghi
pledged to do whatever it takes to preserve the euro and the
index's put/call ratio - a widely-followed measure of investor
sentiment - dropped to a one-month low of 0.57 earlier this
week, signalling a surge in investors' bullishness.
But the index's strongest three-day rally since late
November has left the market relatively vulnerable to a sharp
pull-back if the ECB disappoints, some traders said, while the
macroeconomic newsflow remains grim.
Data showed on Wednesday the euro zone's manufacturing
sector contracted for the 11th straight month in July as output
and new orders plummeted, with Germany's manufacturing sector
contracting at its fastest pace in more than three
The Euro STOXX 50's put/call ratio was back above 1 on
Wednesday, according to data from the Eurex exchange, signalling
a more cautious tone among investors.
"The ECB might only use the threat of buying bonds if yields
rise again, instead of starting to buy them straight away on
Thursday afternoon. They could also unveil new liquidity
measures to help the banks ... There are a lot of possible
scenarios," said Saxo Banque senior sales trader Alexandre
"But there is no silver bullet, and the market might have
gotten ahead of itself."
Central bank sources have told Reuters that ECB intervention
could be at least five weeks away because Draghi's comments had
not been agreed in advance with the Governing Council, and other
elements must first fall into place.
The sources said the ECB could revive its bond-buying
programme in conjunction with the euro zone's rescue funds, but
Spain would first have to request assistance, which it has so
Euro zone leaders would have to agree to the rescue funds
buying up government bonds, and the German Constitutional Court
would have to uphold the legality of the bloc's permanent rescue
fund in a ruling due on Sept. 12.
Around Europe, the UK's FTSE 100 index was up 0.8
percent, Germany's DAX index down 0.2 percent, and
France's CAC 40 up 0.5 percent.
On the earnings front, Schneider Electric gained
3.2 percent after posting a rise in first-half operating profit
despite a low-growth business environment, while Standard
Chartered surged 5.1 percent after posting