European shares held firm early today, with telecom gear maker Alcatel-Lucent surging after Reuters reported Nokia is discussing internally whether to approach its French rival for a tie-up.

Indexes were seen remaining in tight ranges, however, as a budget impasse in Washington and a looming battle over the U.S. debt ceiling rattle investors.

Before Oct. 1, the U.S. Congress needs to pass stop-gap funding for federal agencies, and by Oct. 17 it must raise the federal borrowing limit to avoid a debt default.

Congress is currently struggling to pass the spending bill, while Treasury Secretary Jack Lew said the government would not be able to borrow funds past Oct. 17 if no deal on the debt ceiling is reached, fuelling fears of a default.

At 0708 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,258.45 points.

Shares in Alcatel were up 7 percent. Source: Reuters