* FTSEurofirst 300 down 0.2 percent
* German, French economic activity data strengthens
* Britain's Pearson hit by profit warning
* Spain's Sabadell gains as profit leaps
By Tricia Wright
LONDON, Jan 23 (Reuters) - European shares steadied on Thursday as brighter medium term prospects for earnings after a recovery in economic activity in much of the region offset another mixed batch of corporate results.
Profit warnings from British publisher Pearson on Thursday and oil major Shell last week have sounded alarm bells for investors poring over earnings reports to see if they will justify high valuations after a bumper 2013.
But an improving economic backdrop is helping to assuage those concerns.
Germany's private sector grew at its fastest pace in more than 2-1/2 years in January as factory orders flooded in, and while French business activity shrank again, it did so at a slower rate than expected.
"I think what is still very supportive is domestic macro momentum. This morning (we had) very strong PMIs in Europe; I think this is the dominant story," JPMorgan analyst Emmanuel Cau, said.
"As long as the macro is pointing up, I think the market's concerns about significant earnings downgrades to come will be easing."
Corporate earnings were mixed on Thursday.
Spanish bank Banco de Sabadell SA firmed 5.2 percent, the top riser on the FTSEurofirst 300, after saying profit tripled last year largely thanks to lower losses on soured property assets and higher bond trading gains.
British publisher Pearson sank to the bottom of the index, off 7.9 percent, after warning in a trading update its 2013 earnings per share would be lower than expected.
"It increasingly looks a repeat of other structurally challenged businesses' performance in the past - restructuring charges being higher than expected, benefits delayed and the challenges being deeper," Liberum said in a note, keeping its "sell" rating on the stock.
Europe's earnings season is still in its early stages while in the United States, where 9 percent of S&P 500 firms have reported, results have been mixed.
There, 69 percent have beaten or met consensus on earnings, and 63 percent on revenue, Thomson Reuters Starmine data showed.
"If corporate numbers (in Europe) push on and start to match the improving macro numbers that we're seeing, I think there's every chance that we'll make new ground in Q2 of this year," said Matt Basi, head of sales trading at CMC Markets.
The FTSEurofirst 300 was down 0.2 percent at 1,344.05 points by 1158 GMT. It recovered from sharper early losses after weaker than expected Chinese manufacturing data, leaving it near a new multi-year high of 1,353.47 hit during Tuesday's trade.
The mining sector fell 0.4 percent on Thursday. It was the worst performer in 2013 on concerns over the possible slowdown in China, which is the world's top metals consumer.
Today's European research round-up
Asset returns in 2013: