PARIS, Dec 12 (Reuters) - European shares steadied in early trade on Monday, keeping alive their sharp three-week rally as investors bet the U.S. Federal Reserve will unveil a new round of bond buying in a bid to support the economy.
At 0804 GMT, the FTSEurofirst 300 index of top European shares was up 0.02 percent at 1,139.11 points, after hitting an 18-month high on Tuesday.
UK's FTSE 100 index was up 0.05 percent, Germany's DAX index up 0.2 percent, and France's CAC 40 flat.
The Fed is expected to replace its so-called Operation Twist, a programme of Treasury purchases which is drawing to a close, with a new bond buying plan which will further expand the central bank's balance sheet.
A number of traders, however, warned that stocks were poised for a retreat, after the FTSEurofirst 300 surged about 7 percent in three weeks.
"The market is getting 'overbought', which doesn't happen very often. We're ripe for at least a pause, and maybe a pull-back," said Patrice Perois, trader at Kepler Capital Markets, in Paris.
"Volumes have been extremely low, which means that the rally remains fragile regardless of the newsflow."