Cautious European stocks close flat ahead of Fed

European shares ended flat yesterday, with lacklustre oil stocks weighing on the downside after crude slipped from its record highs, as investors waited on tenterhooks ahead of the US Federal Reserve meeting.

EADS climbed after Airbus said it won 200 new plane orders by the end of last month, while brewer Scottish & Newcastle fell as UK margin concerns overshadowed a profit rise.

"What's important for the market is the Fed explaining why the Fed raises or doesn't raise rates," said Thomas Muehlberger, fund manager at Bayern Invest in Munich.

"There's a shift away from an earnings-related move in the market to an interest rate-related move."

The FTSEurofirst 300 index of leading European shares closed unofficially up 0.1 per cent at 1,330.8 points.

Federal Reserve policy makers were expected to break a run of 17 straight interest rate rises and hold rates at 5.25 per cent.

But investors will be closely listening to comments from Fed Chairman Ben Bernanke for indications on the future direction of monetary policy.

"The big concern is what Mr Bernanke is going to say and if there's any further question marks about inflation," said Philipp Musil, fund manager at Constantia Privatbank.

"We're positive on the market and think there will be a strong performance until the end of the year."

Oil stocks slipped, with BP down 1.2 per cent a day after it started halting production at the biggest oilfield in the United States. Crude prices steadied around $76.85 a barrel after hitting a record high of $78.64 on Monday.

Corporate earnings continued to pour in, but investors were swift to punish companies reporting patchy results. Scottish & Newcastle slid 2.5 per cent after its first-half results rose 12 per cent rise, but its UK margins suffered.

Friends Provident fell 3.3 per cent after its underlying profit slid nine per cent, while Standard Chartered fell 2.8 per cent despite narrowly beating analysts' forecasts with a 15 per cent rise in half-year profits.

"The results beat expectations slightly but the stock's come off to trade flat with some disappointment over the mix in the numbers," said a trader.

On the upside, Nokian Renkaat leapt 18 per cent after its second-quarter sales and operating profit beat expectations, boosting the European auto sector.

Among other auto stocks, Volkswagen added 1.6 per cent and Peugeot gained 0.8 per cent.

EAD rose 2.6 per cent after Airbus won 200 new orders by the end of last month since the start of the year. Figures showed that Airbus delivered 253 planes in the January-to-July period.

Spain's Metrovacesa added 2.6 per cent after an improved partial bid for the firm, despite analysts seeing little change the higher offer would gain regulatory approval.

Salzgitter shares ended up 4.2 per cent after Germany's second-largest steelmaker sold its 17 per cent stake in French tube maker Vallourec through a share and debt placing by Lehman Brothers and Deutsche Bank.

Vallourec shares fell 6.4 per cent.