* Pan-European FTSEurofirst 300 index up 0.8 percent
* Focus on Scottish vote, trading volumes relatively low
* Sulzer gains on mergers & acquisitions news
By Atul Prakash
LONDON, Sept 18 (Reuters) - European equities advanced on Thursday, with a key index climbing to a two-week high after the U.S. Federal Reserve renewed a pledge to keep ultra-low interest rates for a considerable time.
However UK shares slightly underperformed as the voting got underway in Scotland’s referendum on independence, keeping investors on edge ahead of the result on Friday.
The FTSEurofirst 300 index of top European shares was up 0.8 percent at 1,396.07 points by 1034 GMT after rising up to 1,397.01, its highest since Sept. 5.
Britain’s FTSE was up 0.4 percent, Germany’s DAX index gained 1 percent and France’s CAC 40 rose 0.6 percent.
The market got support from a statement from the Fed, which reaffirmed late On Wednesday its commitment to keep interest rates near zero for a “considerable time”. However, it also indicated it could raise borrowing costs faster than expected when it starts moving.
“Investors are feeling a bit relieved that the Fed statement didn’t include any big negative surprise and kept the line (for a ‘considerable time’) that everybody was focusing on,” Robert Parkes, equity strategist, HSBC Securities, said.
“The statement gave mixed signals, although equity investors are interpreting it on the dovish side.”
Despite Thursday’s gains, equity investors remained jittery ahead of the result of the Scottish independence poll.
Volumes for the pan-European FTSEurofirst 300 and London’s FTSE 100 indexes were only 40 percent and 34 percent of their 90-day daily averages respectively after nearly a half-day’s trading.
A YouGov poll for the Times and Sun newspapers showed Scottish support for staying in the United Kingdom at 52 percent with Scottish support for the “Yes” campaign backing independence at 48 percent.
“Overall, equity investors have been quite sanguine about the referendum, we haven’t seen any sell-off in UK shares ahead of the vote, although we’ve seen investors hedging the currency risk in their portfolios,” Saxo Bank trader Pierre Martin said.
The overnight sterling/dollar implied volatility rose to a high of 34.75 percent on Thursday, almost 10 times levels seen a month ago, having closed on Wednesday at around 12.75 percent, as investors stepped up hedging against sharp fluctuations over the next 24 hours.
The vote will close at 10 p.m. (2100 GMT) and the first area results are likely to come out a few hours after that, although the final result may not be clear until 0400-0500 GMT on Friday.
Among other sharp movers, Swiss pump maker Sulzer featured among the top gainers, up 9.3 percent, after saying it is in talks on a potential tie-up with U.S. compressor and turbine maker Dresser-Rand.
That deal would create a machinery company with a combined market valuation exceeding $10 billion.
Germany’s Bayer added 5.1 percent after saying it plans to float its plastics business on the stock market, a unit with an estimated value of about 8 billion euros ($10 billion).
Europe bourses in 2014: link.reuters.com/pap87v
Asset performance in 2014: link.reuters.com/gap87v
Today’s European research round-up (Additional reporting by Blaise Robinson in Paris; Editing by Tom Heneghan)