LONDON (CNNfn) - A positive opening for U.S. stocks boosted European shares to a late-session rally Monday, awaking Continental markets from a slumbering and mainly negative day's trade.
European markets bounced off their lows, although only Zurich made it into positive ground. In London, the FTSE 100 closed just 1.5 points lower at 6,542.2, while in Frankfurt the Xetra Dax ended down 33.08 points, or 0.46 percent, at 7,199.34, held back by a sharp fall for Deutsche Telekom. France's CAC 40 fell 0.3 percent to 6,571.63, and Zurich's SMI advanced 0.4 percent to 8,289.8.
In the U.S. Monday, the Nasdaq composite rose 1.3 percent in early trade and the Dow Jones industrial average gained 0.5 percent.
Attention focused on Tuesday's meeting of the U.S. Federal Reserve. Analysts said it was tough to predict whether policy makers would raise U.S. rates, although the likeliest outcome was thought to be a decision to leave rates unchanged.
In the currency market, the dollar gained strength from lowered expectations of a rate rise, and the euro slipped slightly to 90.32 U.S. cents from 90.66 cents in late Friday in New York.
The FTSE Eurotop 300, a pan-European index of blue chips, was almost unchanged, with none of its industry segments recording a major gain or loss.
In the absence of any concrete corporate news investors reacted to unconfirmed reports of deals. A frisson of excitement in London surrounded health-care retailer Boots (BOOT), which rose 3 percent after a weekend press report that the company might be the target of a $9 billion takeover offer from Wal-Mart Stores (WMT: Research, Estimates). The U.K. retailer refused to comment on the newspaper story, although a source close to the firm told CNNfn.com the report was "absolute rubbish".
In Frankfurt Deutsche Telekom (FDTE) was the main stock in focus, sliding almost 5 percent, after ratings agency Standard & Poor's indicated it likely will downgrade Germany's largest firm sharply. Telekom has spent heavily recently on investments in cutting edge cellular technology. 
Despite the strong start to the tech-heavy Nasdaq, there was little sign of "new economy" shares benefiting disproportionately in Europe.
Modest gains in London were spread across a variety of sectors, with chip designer ARM Holdings (ARM) gaining 3 percent and computer services provider Sema Group (SEM) rising by a similar amount. Other winners in London included bank HSBC Holdings (HSBA) and spirits firm Allied Domecq (ALLD), which both rose 2 percent.
Sema's rival, CMG (CMG) was among the chief casualties in London, declining nearly 4 percent.
Fiber-optics technology firm Bookham Technology () fell by the same amount, while  Pearson (PSON) slumped 3 percent after the media firm moved nearer regulatory clearance for its $2.5 billion acquisition of National Computer Systems Inc.
WPP Group (WPP) slid more than 2 percent as it approaches next week's regulatory decision on its proposed purchase of advertising rival Young & Rubicam (YNR: Research, Estimates).
In Frankfurt, Deutsche Telekom continued to falter following last week's conclusion of Germany's  50.5 billion ($46.6 billion) auction of advanced cell phone operating licenses. The stock slid 4 percent amid concerns about the escalating cost of next-generation cellular technology, and a likely downgrade of the company's credit rating by Standard & Poor's.
Business software house SAP [FSE:FSAP3], Europe's largest, dipped 1 percent as the rest of the market declined slightly.
A couple of companies representing Germany's corporate old guard led Frankfurt's recovery, with electronics and engineering conglomerate Siemens (FSIE) advancing almost 3 percent and Volkswagen (FVOW) following close behind.
A product recall at a rival inflated shares in Michelin (PML). The tire maker, still recovering from a shock profit warning last month, gained nearly 2 percent in an otherwise flat Paris market. Computer services firm Cap Gemini (PCAP) staged a late rally, closing the session nearly 3 percent higher.
Luxury goods maker LVMH (PMC) fell 3 percent, bearing the brunt of French investors' indifference. August traditionally is a very quiet time for French stocks, with many investors off on month-long annual vacations. Utility conglomerate Suez Lyonnaise des Eaux (PLY) fell a similar amount, despite renewed reports of a possible merger involving the firm.
The Zurich market was supported by a 1.3 percent gain at heavyweight food firm Nestlé, and a 3 percent gain for SAir Group. The airline, parent of Swissair, is due to report first-half earnings Tuesday. 
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