European shares extend two-week rally, tracking Asia
* FTSEurofirst 300 gains 0.2 pct, up 5 pct in 2 weeks
* Italian shares steady as Renzi set to meet Napolitano
* Europe equity funds see $17 bln in inflows year-to-date -EPFR
PARIS, Feb 17 (Reuters) - European stocks inched higher in early trade on Monday, extending a two-week rally and tracking gains in Asia as worries over emerging markets eased.
Shares in cyclical mining shares - which have a strong exposure to emerging markets such as China - featured among the top gainers, with BHP Billiton and Glencore Xstrata up 1.2-1.3 percent.
At 0906 GMT, the FTSEurofirst 300 index of top European shares was up 0.2 percent at 1,334.44 points. The benchmark index, which has surged 5 percent over the past two weeks, is less then 2 percent below a 5-1/2 year high hit in January.
Trading volumes were expected to be thin as Wall Street will be closed for a public holiday.
Italian shares were steady, with Milan's FTSE MIB up 0.03 percent. The index strongly outperformed on Friday, with a 1.6 percent rally, as investors welcomed the likelihood of centre-left leader Matteo Renzi becoming prime minister.
Renzi is set to meet on Monday Italian President Giorgio Napolitano, who is expected to ask him to form a new government.
"Investors are quite sanguine about the economic and political situation in peripheral Europe, and that's a very positive signal. Ten-year bond yields continue to fall across the board, a sign of stability which has prompted a lot of investors to come back," said David Thebault, head of quantitative sales trading, at Global Equities.
The MIB is up nearly 8 percent so far this year, strongly outperforming a 1.6 percent rise in the FTSEurofirst 300, as global investors pour money into peripheral euro zone equities, betting on the region's economic recovery.
According to data from EPFR Global, European equity funds have enjoyed net inflows of $17 billion since the start of the year, marking a record start to the year and a sharp contrast with massive outflows hitting emerging market funds.
Within Europe, Italy and Spain equity funds have been leading the way in terms of inflows, EPFR said.
Bucking the trend on Monday, ThyssenKrupp fell 2 percent, with traders pointing to Citigroup cutting its recommendation on the stock to "sell" from "neutral", citing inflated valuations.
"The market is continuing its recovery," said Berkeley Futures associate director Richard Griffiths.
France's Bouygues slipped 0.8 percent after unveiling a 1.4 billion euro ($1.9 billion) writedown on its investment in Alstom to reflect the train and turbine maker's weaker cash flow forecasts.
In core European markets, the UK's FTSE 100 index was up 0.4 percent, Germany's DAX index down 0.1 percent, and France's CAC 40 down 0.1 percent.
Europe bourses in 2014:
Asset performance in 2014:
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