The FTSE 100 is virtually unchanged today, down by 0.3% at the time of writing. But I think this lack of movement reflects uncertainty rather than confidence.
Press reports suggest Brexit talks between the Prime Minister and EU leaders are in the final stages of collapse, after the EU issued a detailed rejection of Boris Johnson’s latest proposal.
Looking further afield, US traders are anxious about this week’s US-China trade talks. President Trump has already announced new restrictions preventing US companies from exporting to a range of Chinese tech firms and government bodies.
Are we headed for a recession?
Recruitment stocks are often seen as a useful leading indicator of the state of the real economy. If business is slowing, one of the first things companies usually do is to cut back on recruitment.
Unfortunately, that’s what seems to be happening. FTSE 250 recruiter PageGroup is down by 13% at the time of writing, after cutting its profit guidance for the year. Full-year operating profit is now expected to be between £140m and £150m, compared to previous consensus forecasts for £156m.
PageGroup boss Steve Ingham says that the firm is facing “increasingly challenging trading conditions” in larger markets such as China, the UK and France. The financial services market in New York is also said to be slowing, and Mr Ingham says there are signs that the wider US and EU markets could start to slow.
Rival Robert Walters struck a similar note. It warned that profits would be flat this year thanks to headwinds such as Brexit, the US-China trade war and the Hong Kong protests.
No deal for LSE
Last month I warned readers to watch out for deal news from FTSE 100 firm London Stock Exchange. With two conflicting takeover deals on the table, someone would have to back down.
Today we found out who. Would-be acquirer Hong Kong Stock Exchange (HKEX) has said it won’t be making a firm offer for the LSE. The shares are down by 5% at the time of writing, but remain close to record highs, at about £71.
The withdrawal of HKEX leaves the path clear for LSE to compete its planned takeover of financial data group Refinitiv, formerly known as Thomson Reuters.
I can see the logic behind this deal, which should create a global data powerhouse. But it looks expensive to me. LSE management may yet face some resistance from shareholders.
Watch out for a bumpy landing
Budget airline easyJet (LSE: EZJ) issued a bullish fourth-quarter statement today. Passenger numbers rose by 8.6% to 96m last year and the firm says that adjusted pre-tax profit will be between £420m and £430m. That’s at the upper end of previous guidance.
However, the shares are down by 5% and with good reason, in my view. Despite receiving a boost thanks to strikes by Ryanair and British Airways staff, easyJet’s load factor — the percentage of seats sold — fell by 1.4% to 91.5%. This suggests to me that last year’s 10.3% capacity increase may have been too much.
It seems clear to me that profits remain under pressure at easyJet. I expect the airline to be an eventual winner in this sector, but I don’t see any reason to rush into the stock at the moment. I’d be looking to buy at under 1,000p for a long-term position.