European shares close flat before Fed

European share indexes ended flat yesterday, matching a 4-1/2 year closing peak, with markets awaiting a widely expected rise in US interest rates and any hints whether this will be the Federal Reserve's last rate move.

Shares in European telecoms operators were hit though as France Telecom fell 1.9 per cent after ousting its finance director and Britain's Cable and Wireless tumbled 11 per cent following a warning on core UK profits.

Telecom equipment makers ticked up however after Ericsson posted a record fourth quarter although shares in the Swedish firm only added 0.7 per cent as its fourth-quarter pre-tax profit and gross margin were below expectations.

The pan-European FTSEurofirst index of 300 leading shares unofficially closed 0.05 per cent higher at 1,319.68 points, its best close since August 2001, having ended at 1,319.67 on Friday.

It earlier touched an intra-day 4-1/2-year high at 1,325.97. Federal Reserve officials, meeting one last time under Alan Greenspan's chairmanship, were expected to raise its key funds rate to 4.5 per cent from 4.25 per cent.

"We expect that markets will ultimately conclude that today's 25 bp rate hike was the last of the cycle," UBS strategist Daniel Katzive said.

"However, with a new chairman expected to be confirmed in the hours following today's meeting and two months of data to come before the March 28 gathering, we do not expect the Fed statement today to provide a lot of specific guidance on the prospects for further hikes."

Telecoms were further hurt by Exane BNP Paribas cutting its rating on France Telecom to "sell" from "neutral".

Sentiment was negative across the sector, with heavyweight Vodafone down 2.3 per cent, BT Group losing 1.1 per cent, and Deutsche Telekom down 1.4 per cent. This dragged the telecoms index down 1.2 per cent.