* FTSEurofirst 300 down 0.2 pct * Index still close to 22-month high * Basic resources stocks fall as China inflation caps stimulus prospects * Asset flows show appetite for shares on the rise By Francesco Canepa LONDON, Jan 11 European shares edged down on Friday but stayed close to near two-year highs, with falls in basic resources stocks on concerns about faltering monetary stimulus from China offsetting gains in tech shares. Resources stocks fell 1.7 percent as a pick-up in inflation in China, the world's largest consumer of metals, narrowed the scope for the central bank to boost the economy by easing policy. Tullow Oil shed 4.7 percent and had already traded its full-day volume average at 0945 GMT, as the energy group's production figures for 2012 narrowly missed investor estimates. They weighed on the FTSEurofirst 300 index of top European shares, which was down 0.2 percent at 1,162.72 points, still within a stone's throw of the 22-month high of 1,170.29 points hit in the previous session. Curbing losses on the index were tech shares, led by French IT services group Cap Gemini and Nokia . The Finnish handset maker extended gains from the previous session, when it unveiled strong sales of its Lumia smartphones. Cap Gemini rose 4.4 percent after its Indian peer Infosys, raised its revenue forecast and posted stronger-than-expected quarterly profit. The FTSEurofirst 300 has risen 14 percent since late July, boosted by bold central bank action to revive the global economy and shore up debt markets. It was edging in and out of "overbought" territory on its 14-day Relative Strength Index, a momentum indicator. "Equities are very overdue a rest but that shouldn't make people throw in the towel in my opinion (as) they will continue to be supported by central banks' very accommodative policies," Edward Page Croft, managing director at Stockopedia, said. "People are starting to come back to the stock market because they don't have any other option. They don't make money on bonds or property." Over the four business days to Jan. 8, equity mutual funds took in $6.8 billion, with equity flows exceeding bond flows, EPFR data showed, as central banks' easy monetary policies depressed bond yields and pushed investors towards equities. Investors in the United States were also warming to European shares after significantly reducing their exposure at the start of the financial crisis in 2008. U.S. funds invested in European equities recorded net inflows for the 14th straight week in the seven days to Jan. 9, Lipper data showed. While most of the money came through Exchange Traded Funds, which are typically used by institutional investors, other types of funds also recorded net inflows, showing U.S. retail investors were also coming back to the region. CYCLICALS IN DEMAND Cyclical euro zone stocks - more sensitive to economic growth and financial stability - benefited the most from the growing appetite for equities, underpinned by a European Central Bank pledge to support countries that ask for a bailout. The Russell Eurozone Dynamic Index, made up of companies whose earnings and share prices are more sensitive to economic and credit cycles as well as market volatility, rose 8.3 percent in the fourth quarter and 3.4 percent in the week to Jan 7. It outpaced the Russell Eurozone Defensive Index, which rose 4.1 percent in the fourth quarter and 1.1 percent in the first week of the year, and the broader Russell Eurozone Index, up 6.3 percent and 2.4 percent. Top holdings in the Dynamic Index include German industrial conglomerate Siemens and stocks heavily correlated with sovereign debt, such as Spanish bank Santander. Santander rose 14 percent last year, recouping part of the 24 percent fall it recorded in 2011, when the market was worried about a potential euro zone break-up. "Financial stocks are still very attractive, especially in the periphery," a Milan-based broker said. "People are going for stocks that underperformed."