European shares hit two-week high, Scottish vote drags on FTSE

* Pan-European FTSEurofirst 300 index up 1 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 its pledge to keep interest rates ultra-low for a considerable time.

British shares underperformed as 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 1 percent at 1,399.09 points by 1401 GMT after rising up to 1,399.19, its highest since early September. Britain's FTSE was up 0.5 percent, Germany's DAX index gained 1.2 percent and France's CAC 40 rose 0.7 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 that everybody was focusing on," HSBC Securities equity strategist Robert Parkes said. "The statement gave mixed signals, although equity investors are interpreting it on the dovish side."

Equities also got some lift after the European Central Bank drew far less demand than expected for its new four-year loans to banks (TLTROs), raising expectations it may eventually opt for more radical monetary stimulus measures.

"The demand seen today for the TLTRO is relatively disappointing. It shows the limits of the programme," said Patrick Moonen, senior strategy, multi-asset, at ING IM, which has 177 billion euros under management.

"With TLTROs, it's the banks that decide whether or not they take the liquidity. With full, U.S.-style QE (quantitative easing), it's the central bank which decides. The ECB's work is not finished, and it will have to buy sovereign bonds at some point. That's our main scenario."

Despite Thursday's gains, equity investors remained jittery ahead of the result of the Scottish independence poll.

Volumes for the FTSEurofirst 300 and London's FTSE 100 indexes were only 58 percent and 54 percent of their 90-day daily averages respectively after seven hours of trading.

Final opinion polls show a slender lead for supporters of keeping Scotland within the United Kingdom.

"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 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 movers, Swiss pump maker Sulzer jumped 8.4 percent, after saying it is in talks on a potential tie-up with U.S. compressor and turbine maker Dresser-Rand. The deal would create a company with a combined market valuation exceeding $10 billion.

Germany's Bayer (Milan: BAY.MI - news) added 5.9 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: http://link.reuters.com/pap87v

Asset performance in 2014: http://link.reuters.com/gap87v

Today's European research round-up (Additional reporting by Blaise Robinson in Paris; Editing by Catherine Evans)