MARKET REPORT: High hopes for SThree in 2010

A combination of recovery hopes and revived takeover talk helped international specialist staffing business SThree to keep traders on their toes in half-empty dealings rooms.

The shares jumped 10.3p to a year's high of 294p as buyers took the view that either 2010 will be a much more profitable year, or that Adecco, the world's largest human resources company, will pounce with a £500million or £4-plus-a-share cash offer.

SThree's chief executive Russell Clements has described 2008-09 as being the most difficult in the group's 23-year history. But it now appears to be well placed for a recovery. Recently he revealed that full-year results are expected to be in line with expectations, adding that all the signs indicate most of its markets have stabilised and some are showing improvement.

ADECCO

Price boost: Rumours of a better year in 2010 or a offer from Adecco have boosted SThree shares

Management now plans to open up to six offices this financial year and increase headcount by up to 30 per cent, the bulk of which will be outside the UK. Broker Oriel Securities says this all smacks of a business signalling a return to its natural state of strong organic growth.

SThree's shares were the next best thing since sliced bread back in March, when trade magazine The Recruiter splashed on a story that the ubiquitous Adecco was stalking the company. Remember, Adecco bid £1.3billion or £4 a share for Michael Page (3.9p easier at 380.4p) in 2008 before walking away. So far it's kept its powder dry, but the Swiss-based group still desperately wants to expand in Europe.

The Footsie finally ran out of steam on the last full trading session of the decade. Investors wound down their positions after booking stellar gains in the magnificent rally stretching back to March. The blue chip index relinquished 39.75 points to 5,397.86 but still stands 23 per cent up on the year.

Investors obviously hope 2010 will bring equally good returns. A lot will again depend on Wall Street's performance, and judging by upbeat comments from Dean Maki, chief US economist of Barclays Capital, the Dow Jones could have a stormer.

Maki believes the world's largest economy will expand 3.5 per cent in 2010, turning in its best performance since 2004, as spending perks up and companies increase investment and hiring.

Wall Street yesterday initially rose 31 points on news that business activity in the US Midwest expanded far more than expected in December.

Satellite group Inmarsat, strongly rumoured to be on 28 per cent shareholder Harbinger Capital's New Year shopping list, improved 2p to 694p. Scrappy buying on consideration of its defensive qualities helped multi-utility Scottish and Southern Energy buzz 4p higher to 1,163p.

Banks were back in the doghouse - where they have been for most of what has proved to be an historic and humiliating year. Indeed, the strong market rally over the past month or so has taken place with little or no help from the financial sector.

Simon Denham, head of Capital Spreads, warns: 'Stock markets will find it increasingly difficult to rally in the face of a weak financial sector. Without strong lending economic expansion must take the form of organic growth and, sorry to say, it is difficult to see this helping much in the UK once the Bank of England stops printing money.'

Royal Bank of Scotland dropped 0.96p to 29.08p on fears it will be a very long road back to recovery and profitability for the 84 per cent owned government bank. The year's low was 10p. Barclays eased 2.75p to 272.25p, while Standard Chartered lost 33p to 1,557p in sympathy with the overnight weakness of Far East markets. Lloyds Banking Group, which is 43 per cent owned by the UK taxpayer, closed 0.23p easier at 49.84p. Its army of small shareholders will certainly be glad to see the back of 2009 after ending the year forking out for its record-breaking £13.5billion rights issue at 37p a share.

Hoping that advertising trends will improve going into next year, buyers chased Daily Mirror publisher Trinity Mirror up 5.1p to 152.6p. Growing optimism about the UK housing market after the Land Registry reported that prices in England and Wales rose 0.9 per cent in a sixth monthly gain, prompted a 2.9p rise to 121p by housebuilder Barratt Developments.

When dealers heard that Shay Ben-Yitzhak had stepped down at 888 Holdings with immediate effect, shares of the online gaming group were sold down to 107.4p before they closed 0.7p off at 110.6p.

 - One of the better-performing oil stocks in recent months, Cairn Energy has firmed another 1.9p to 331.1p. It recently announced that it is moving forward exploration drilling offshore Greenland to 2010 from 2011. RBS/ABN Amro reckons two wells are likely in the summer drilling season between June and October. The broker says the current share price undervalues the potential in that area.

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