European shares traded flat on Thursday, oscillating around opening levels as investors digested a mixed bag of corporate earnings reports, though expectations of further U.S. monetary stimulus were seen likely to drive short-term gains.

A big drop in U.S. new homes sales on Wednesday, after a series of bleak U.S. macro data, has fuelled expectation that the Federal Reserve might unveil a new round of quantitative easing at its meeting next week.

"Despite increasing speculation that the Fed will announce a range of measures including further QE possibly as early as August the underlying confidence remains fragile and volatility looks set to continue," Mike McCudden, head of derivatives at Interactive Investor, said.

The FTSEurofirst 300 was trading 0.02 points lower at 1,017.87 by 0851 GMT, having fallen 0.1 percent on Wednesday, albeit steadying after a decline of around 4.5 percent over the previous three sessions on concerns about the sustainability of Spain's finances.

Comments by European Central Bank policymaker Ewald Nowotny on Wednesday, which raised the prospect of steps that could boost the firepower of the euro zone's new bailout fund, helped improve market sentiment.

Unilever was the top riser in Europe on Thursday, ahead 5.2 percent, after strong emerging markets helped the Anglo-Dutch consumer goods giant avoid issuing profit warnings, as two of its main rivals have, although it did warn of tougher times ahead.

British aero engine maker Rolls-Royce also saw good gains, ahead 4.8 percent, as it unveiled a better-than-expected 7 percent rise in first-half profit, driven by airlines' need to renew ageing fleets with more fuel-efficient planes.

The European earnings season is about a quarter of the way through, and is off to a robust start, with 58 percent of the STOXX 600 companies reporting results so far having met or beaten forecasts.

Heavyweight UK energy stocks Royal Dutch Shell and BG Group, however, nursed respective falls of 3.6 percent and 1 percent after second-quarter earnings from both lagged expectations.

Volumes in the shares were over 30 percent of their 90-day daily averages.

Weaker prices for oil worldwide and for gas in North America saw Shell, the second largest of the western world oil "majors" behind Exxon Mobil, report a fall in second-quarter earnings to around $6 billion from $8 billion a year ago on a current cost of supply basis. The result undershot analysts' predictions of around $6.3 billion.

BG Group posted a 4 percent fall in quarterly profit and downgraded its 2012 production forecasts, due to difficulties in the North Sea and its reduced activity in the U.S. shale gas market.

"These disappointments shouldn't really have come as a surprise given the recent decline in oil and gas prices, but given the fragility in the market and importance of the earnings focus at the moment investors have shied away from the sector," said a London-based trader who declined to be named.

Exxon Mobil reports earnings later on Thursday.