* FTSEurofirst 300 up 0.5 percent, near 5-year high
* Stays within range pending expected cut to Fed stimulus
* Guidance key to avoid volatility spike - BNP Paribas IP
By Francesco Canepa
LONDON, Sept 18 (Reuters) - European shares hovered near
five-year highs on Wednesday, staying within their weekly range
as investors held fire expecting the U.S. Fed to announce a
first cut to its equity-friendly stimulus programme.
The pan-European FTSEurofirst 300 closed up 0.5
percent at 1,258.43 points, led by tech stocks as
traders speculated about a possible bid for chip maker ARM
Holdings and handset firm Nokia was boosted
by a broker upgrade.
The FTSEurofirst was hovering a touch below a five-year high
of 1,262.25 points hit on Monday and well within its 1 percent
range for the week.
Investors were reluctant to make large directional bets on
indexes before a Federal Reserve announcement scheduled for 1800
GMT. Expectations centre on a $10 billion cut to its $85 billion
monthly asset purchases, which have helped the FTSEurofirst rise
around 15 percent in the past year.
With a small reduction to the programme now seen as priced
in, any indication about the pace of future cuts was likely to
set the market's tone for the coming months.
"If you make it too data-dependent you ... are just fuelling
volatility (in asset prices)," William de Vijlder, chief
investment officer for strategy and partners at BNP-Paribas
Investment Partners, said.
"If you set a timeframe ... to roll back the programme so
that it stops at a certain date, the market would price that
instantaneously and you would not create any volatility."
De Vijlder saw equities as being in a sweet spot at a time
when the global economy showed signs of recovery and a gradual
reduction in the Fed's purchases hurts demand for bonds.
Equity investors remained calm in the run-up to the Fed's
announcement, with the Euro STOXX 50 volatility index,
which measures the cost of insuring against future swings in
euro zone blue-chip stocks, down 4.3 percent and close to a
recent one-month low.
In a further sign of investors' sanguine view on shares,
demand for put options on the Euro STOXX 50, used by
managers to protect their portfolios against potential falls,
has been fading before September derivative contracts expire on
Atif Latif, director at Guardian Stockbrokers, said only a
cut to stimulus of $15 billion or more would be negative for the
market in the short term.
Among specific stocks, Finland's Nokia, was the
top riser, up 4.1 percent, after Credit Suisse upgraded the firm
to "outperform" from "neutral" in light of its recently agreed
merger with Microsoft.
British chip-maker Arm rose 3.2 percent as traders rehashed
talk of a bid for the firm, although there was no firm detail on
the suitor. The broader STOXX Europe 600 Technology index rose
1.2 percent to highs not seen since early 2008.