Fears that mobile phone giant Vodafone may become embroiled in a costly bid battle for a US rival kept European shares flat at midsession yesterday, offsetting positive 2004 outlooks from a number of firms.

A source told Reuters that Cingular Wireless had raised its offer for the third biggest US mobile operator AT&T Wireless to $38 billion, trumping a weekend bid from Vodafone thought to be worth around $35 billion.

"This may prove to be a bit rich for shareholders of Vodafone, who may be worried that shareholder value may not be enhanced by this acquisition," said David Buik of spread betting firm Cantor Index.

Vodafone shares were down 3.5 per cent to a seven-week low as nervous investors awaited the outcome.

"I'm at the point where I really want to see something from the companies," said one London analyst. "If you're buying or selling Vodafone shares today you're just dealing into uncertainty. Show me the deal."

On the positive side, reinsurance giant Swiss Re lead blue-chip gainers, rising 2.1 per cent after a sounding an upbeat note on sales growth and earnings prospects for 2004.

By 1134 GMT, the FTSE Eurotop 300 index of pan-European blue chips was unchanged at 993.7 points while the narrower DJ Euro Stoxx 50 index edged 0.2 per cent higher to 2,867.6 points.

The Eurotop 300 regained the 1,000 point mark for the first time in 18-months last week but has spent the past month trapped in a 30 point range below that.

"Federal Reserve Chairman Alan Greenspan has reinforced the notion that US rate policy is still critically linked to the progress of the slack US jobs market. Until that shifts significantly one way or the other, bonds and stocks are effectively in a waiting pen," Bear Stearns said in a note.

However, many strategists remain convinced European shares are poised to extend their gains, buoyed by a solid performance from their US peers, improving profits and a stronger global economy.