LONDON, Jan 9 (Reuters) - European shares steadied near a 5-1/2-year high on Thursday, with investors staying on the sidelines before policy meetings that could provide hints about future actions by the European Central Bank and the Bank of England.
Both central banks are likely to keep interest rates on hold later in the day, but the ECB is expected to remind markets its policy could ease further if inflation stays too low or money market conditions tighten.
"Bulls are hoping for a very dovish ECB as they will have to start fighting deflation this year. Longer term, we expect more expansionary action from the ECB and that will be one of the major elements driving European stock market outperformance," Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets in Brussels, said.
"However, in the short-run they may be a little bit disappointed as with a slightly weaker euro and much tighter peripheral spreads, the sense of urgency, to a large extent, has disappeared."
At 0803 GMT, the pan-European FTSEurofirst 300 was flat at 1,321.49 points, trading just below its 5-1/2 year high scaled in the previous session. But Portugal's PSI 20 climbed 0.7 percent on rising confidence about a recovery in peripheral euro zone economies.
Among individual movers, British grocer WM Morrison fell 7.1 percent, the top decliner on the FTSEurofirst 300 index, after posting a sharp fall in like-for-like sales over Christmas.