Cautious optimism remains mood of the day for recruiters – City Comment
6 March 2014
The broad theme of the last few months – optimistic data in Western economies followed by ongoing debate about how rapidly to withdraw economic stimulus – persisted during February. However, this month stock markets have been required to accommodate an unexpected political crisis in Ukraine. After a strong rally over the last 12-18 months, share prices are vulnerable to these types of left-field geopolitical shocks.
Thu, 6 Mar 2014 | Kean Marden, head of business services equity research, Jefferies International
The broad theme of the last few months – optimistic data in Western economies followed by ongoing debate about how rapidly to withdraw economic stimulus – persisted during February. However, this month stock markets have been required to accommodate an unexpected political crisis in Ukraine. After a strong rally over the last 12-18 months, share prices are vulnerable to these types of left-field geopolitical shocks.
US economic data has generally disappointed over the past few weeks. Employment statistics have underwhelmed and housing activity has softened considerably, including in areas unaffected by the cold weather. At this stage, it is difficult to assess the cause – a particularly brutal winter or an underlying loss of momentum?
In contrast, UK momentum remains robust and the evidence of an accelerating and broadening economic recovery grows ever stronger. Consumer confidence and corporate investment intentions have improved further. Employment, advertising, real estate and construction markets are all showing very encouraging trends. Indeed, some house builders have dubbed January their best month on record.
Trading updates from the recruitment sector largely echo those trends. Hays, Michael Page and Robert Walters have all made more upbeat comments regarding January/February trading recently supported by temp return to work data and evidence of more rapid hiring decisions by clients. Overseas, there are some early signs of life in Australia but European momentum remains patchy, especially in France.
Over the past fortnight, recruiter shares have generally outperformed flat equity markets and the leaderboard was headed by Impellam (+6%), despite a few issues in their small, non-core support services division. At the recent results, the chief executive officer unveiled the laudable aspiration to build a better business that is “ethical, compliant, purposeful and trusted to deliver on its promises". Elsewhere, Kelly Services, Hays (positive reaction to their interim results) and Brunel [mainland European engineering, IT and oil & gas staffing specialist] rallied 5-6%, with Robert Walters (+4%) close behind.
Only two stocks in the universe we monitor declined. Randstad fell by 8% as one-off cost items impacted Q4 profitability but some of these elements were either investments to support growth or are temporary in nature. SThree (-2%) gave back some gains after benefiting from a very strong run during the first three weeks of February.
The relentless reporting cycle continues next week with Adecco on Wednesday and SThree on Friday. Both are likely to maintain the tone of cautious optimism that has characterised the start to 2014.
The broad theme of the last few months – optimistic data in Western economies followed by ongoing debate about how rapidly to withdraw economic stimulus – persisted during February. However, this month stock markets have been required to accommodate an unexpected political crisis in Ukraine. After a strong rally over the last 12-18 months, share prices are vulnerable to these types of left-field geopolitical shocks.
US economic data has generally disappointed over the past few weeks. Employment statistics have underwhelmed and housing activity has softened considerably, including in areas unaffected by the cold weather. At this stage, it is difficult to assess the cause – a particularly brutal winter or an underlying loss of momentum?
In contrast, UK momentum remains robust and the evidence of an accelerating and broadening economic recovery grows ever stronger. Consumer confidence and corporate investment intentions have improved further. Employment, advertising, real estate and construction markets are all showing very encouraging trends. Indeed, some house builders have dubbed January their best month on record.
Trading updates from the recruitment sector largely echo those trends. Hays, Michael Page and Robert Walters have all made more upbeat comments regarding January/February trading recently supported by temp return to work data and evidence of more rapid hiring decisions by clients. Overseas, there are some early signs of life in Australia but European momentum remains patchy, especially in France.
Over the past fortnight, recruiter shares have generally outperformed flat equity markets and the leaderboard was headed by Impellam (+6%), despite a few issues in their small, non-core support services division. At the recent results, the chief executive officer unveiled the laudable aspiration to build a better business that is “ethical, compliant, purposeful and trusted to deliver on its promises". Elsewhere, Kelly Services, Hays (positive reaction to their interim results) and Brunel [mainland European engineering, IT and oil & gas staffing specialist] rallied 5-6%, with Robert Walters (+4%) close behind.
Only two stocks in the universe we monitor declined. Randstad fell by 8% as one-off cost items impacted Q4 profitability but some of these elements were either investments to support growth or are temporary in nature. SThree (-2%) gave back some gains after benefiting from a very strong run during the first three weeks of February.
The relentless reporting cycle continues next week with Adecco on Wednesday and SThree on Friday. Both are likely to maintain the tone of cautious optimism that has characterised the start to 2014.
