Market Report: Bullish broker recruits buyers for Michael Page

Michael Page International was among the strongest on the FTSE 250 last night after analysts recruited investors with some bullish words on the staffing sector's prospects. HSBC said that while staffing valuations were low and factoring in a sharp downturn, leading indicators were turning more positive, suggesting a less hairy mid-cycle slowdown.

The broker's departure point was the US, not the UK jobs market. "Recent US labour market data have been very strong in some key areas... Crucially this has been driven by the professional and business services sector," they noted, adding that "if this momentum holds, the implication should not be underestimated: mid-cycle slowdowns have been characterised by resilient white collar employment; recessions have not".

Moreover, "it is worth remembering that global labour markets have mirrored movements in the US market for as long as there are records, albeit with a lag". This bodes well for Michael Page, which is geared to the higher margin white collar market, according to HSBC. "The white collar market segment has historically been the profit driver during the second leg of labour market recovery after manufacturing growth slows," the broker explained.

The circular, which also saw HSBC upgrade Michael Page to "overweight", helped the stock rally by 21.2p to 385.4p. The broker was less keen on "neural"-rated Hays, which, though higher at 75.2p, up 0.75p, lagged behind Michael Page yesterday.

Overall, the market continued to tread water, with the FTSE 100 barely changed at 5,509.02, down 8.42 points. The FTSE 250, though firmer, was also broadly flat, up 15.45 points at 10,275.56. On the benchmark, there was some downward pressure in the form of some big blue chips, including Marks & Spencer, down 7.8p at 325p, going ex-dividend, and from continued volatility in the European sovereign bond markets. There was also some grim news on the UK economy, with the Bank of England scaling back its growth forecasts.

But offsetting this, Mario Monti was sworn in as the new Italian Prime Minister, with the news offering some reassurance on political progress in Europe. The US also provided some support, with better than expected data on industrial production helping limit losses. The lack of meaningful gains, however, showed that many traders remained wary of moving in. "It's difficult not to feel that people are battening down the hatches," Ben Critchley, a sales trader at IG Index, said.

Back to the day's movements, and British Sky Broadcasting fell by nearly 5 per cent or 36.5p to 716p as it went ex-dividend. The same factor led to weakness in Vodafone, which was 3.7 per or 6.7p worse off at 173.9p, and in J Sainsbury, which was 5p lower at 300.4p last night.

Further afield, the water utility and waste management company Pennon was broadly unchanged, easing by 2.5p to 714.5p, after Goldman Sachs reiterated its negative view. The broker said it expected earnings growth at the FTSE 250-listed firm to outpace the sector average, but warned that the shares appeared to be up with events. "We believe this growth is more than reflected in the current share price: either Pennon's water business is at a significant premium to peers, or [its Viridor waste management business] is," Goldman explained, repeating its "sell" recommendation and lowering its target for Pennon's share price to 721p.

Goldman was more bullish on Aveva, whose software is used to design everything from power stations to ships. Cheered by the recent half yearly results, the broker said the company remained a "strategic asset", though its commentary failed to move the stock, which was 41p lower at 1,505p. "In our view, the cyclical and structural drivers [namely, capital spending in its end markets and a high exposure to fast growing emerging economies] remain intact and we would use any weakness as a buying opportunity," Goldman explained.

Elsewhere, there were signs of nervousness around consumer-facing stock ahead of this morning's release of retail sales figures for October. Economists expect an uninspiring set of figures, with Howard Archer at IHS Global Insight anticipating a month on month decline of 0.1 per cent after the "somewhat surprising increase of 0.6 per cent in September". "Survey evidence for October from the Confederation of British Industry and the British Retail Consortium, in particular, point to muted retail sales in October," he said.

Ahead of the report, the mid-cap loser board was littered with well known high street names. The Argos and Homebase owner Home Retail Group took the wooden spoon, retreating by 7.5 per cent or 5.9p to 72.7p. The Superdry retailer Supergroup was second from the bottom, falling by more than 5 per cent or 34p to 623p, while Debenhams lost more than 3 per cent or 2.15p to 62.5p last night.