* FTSE 100 edges 0.1 percent lower
* Three week rally left the market near all time highs
* Mondi (LSE: MNDI.L – news) the latest upbeat earnings report
* Pearson (NYSE: PSO – news) issues profit warning
By Alistair Smout
LONDON, Feb 28 (Reuters) – Britain’s top share index held steady on Friday, leaving it set to post its best month in seven after a three-week rally that has left it within touching distance of its all-time high.
While that rally has stalled this week, the FTSE 100 is just 2 percent below its record peak, set in 1999.
Shares rallied strongly after hitting a 2014 low in early February, but have fallen 0.4 percent since Monday as political turmoil in Ukraine and fresh concerns about China’s economy have revived concerns about emerging markets.
The 4.7 percent gain posted so far this month would make it the best February since 1999.
“The market looks overvalued, and there’s potential complacency creeping in, just as we were in mid-January before the emerging market scare,” said Jeremy Batstone-Carr, analyst at Charles Stanley (LSE: CAY.L – news) .
“Investors are clearly looking to downplay the threat of contagion, however, and the FTSE feels as though it wants to go through its record before it takes a breather.”
Supporting the rally has been a decent earnings season, in which 69 percent of companies that have reported quarterly earnings so far have beaten or met expectations.
South African paper maker Mondi was the FTSE’s top riser, up 3.9 percent, after it posted higher 2013 full-year earnings on Friday, helped by benefits from acquisitions in its packaging business.
But earnings on Friday were mixed, with publisher Pearson (Dusseldorf: PES.DU – news) down 6.8 percent after it warned that it expected earnings to fall in 2014.
It reported results within the range of already downgraded forecasts due to the hit from the deteriorating U.S. education market.
“They’re pretty awful figures. They’re trying to rebuild around this U.S. education division, which has caused a real weakness here,” ETX Capital head of trading Joe Rundle said.
“I wouldn’t want to be long. They’re betting on a losing horse. They don’t have the scale to compete in this industry.”
The FTSE 100 was down 5.62 points, or 0.1 percent, at 6,804.65, with the drop in Pearson accounting for nearly half the index’s fall.
The FTSE underperformed continental European shares, which were buoyed by the prospect of further European Central Bank easing if inflation data at 1000 GMT points to deflation risks in the euro zone economy.
The threat of below-target inflation is prompting the ECB to consider additional stimulus measures on top of record-low rates, just as the U.S. Federal Reserve is winding down its own stimulus policies.
“There’s some anticipation that we might see some monetary policy easing, maybe from the ECB next week,” Charles Stanley’s Batstone-Carr said.
“Without the Fed’s liquidity infusion, it’s no surprise then that the market is looking to Europe to be the liquidity generating region of choice.”