European shares extend rally, led by DAX

* FTSEurofirst 300 up 0.4 pct, DAX up 1 pct

* BHP Billiton (NYSE: BBL - news) holds off on buyback; shares drop

* Earnings season close to end, 52 pct of firms meet/beat

By Blaise Robinson

PARIS, Aug 19 (Reuters) - European shares rose in early trading on Tuesday, extending the previous session's rally, as investor concern over the conflict in Ukraine began to ease.

Germany's DAX - recently hit by the faceoff between Ukraine and Russia and concern that sanctions against Moscow could hurt Europe's biggest economy - outperformed on Tuesday, up 1 percent. The index has gained nearly 4 percent in the past 10 days but is still down 7 percent since mid-June.

At 0818 GMT, the FTSEurofirst 300 index of top European shares was up 0.4 percent at 1,344.86 points. That followed a rise of 1.2 percent in the previous session and tracked solid gains on Wall Street, where the Nasdaq Composite closed at a 14-year high.

The FTSEurofirst 300 is still down 3.9 percent since mid-June.

In Ukraine, government forces reported new advances overnight, after a weekend breakthrough when troops raised the national flag in Luhansk, a city held by pro-Russian separatists since fighting began in April.

"The situation in Ukraine is still very tense, but slowly investors are getting used to it and turning their focus back on the macro and micro data," said Arnaud Scarpaci, fund manager at Montaigne Capital.

"There's been a strong outperformance of U.S. stocks versus Europe in the past few weeks, so there's scope for a little rebound in Europe in the short term. Good earnings from Lindt and Moller-Maersk today are helping in that direction."

The German equity market's recent underperformance has dragged the average price-to-earnings ratio of local shares down to a level not seen since October 2013, according to data from Thomson Reuters Datastream.

The MSCI Germany index trades at 12 times expected earnings while the MSCI Europe trades at 13.6 times earnings, making Germany's P/E ratio relative to Europe the cheapest in nearly 10 years. By comparison, Wall Street's S&P 500 trades at about 15 times expected earnings.

ROBUST EARNINGS

Shares (Frankfurt: DI6.F - news) in Moller-Maersk surged 5 percent after the Danish shipping and oil group posted better-than-expected results, raised its full-year profit outlook and disclosed ed a $1 billion share buyback plan.

"It's a strong signal that they are upgrading their expectations for the future by so much," Sydbank (Stuttgart: TM2.SG - news) analyst Jacob Pedersen said.

"I had expected around $4.3 billion on underlying result this year. Now (NYSE: DNOW - news) they are saying $4.5 billion and that shows they are very confident about the development in Maersk Line in the next quarters."

Shares in Lindt & Spruengli gained 0.6 percent as the Swiss chocolate maker confirmed its full-year targets after profit rose 14 percent in the first half.

Bucking the trend, BHP Billiton stock dropped 3.8 percent. The mining company missed earning forecasts and held off announcing a buyback but said it would spin off some assets.

As Europe's earnings season draws to an end, about 52 percent of STOXX 600 companies have met or beaten earnings forecasts, according to Thomson Reuters StarMine data.

Profits have risen 10 percent in the second quarter overall, but revenue have dipped 0.7 percent, data shows.

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 Teis Jensen in Copenhagen; Editing by Larry King)