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Deutsche Bank warnings plummet recruitment agencies into free fall

Deutsche Bank said that the outsourcing of recruitment has impacted the pot of obtainable gross profit

Deutsche Bank has put forward warnings that the employment sector is beginning to experience a depression, viewing slow US growth as a likely forerunner for different sectors.

After claims on Friday that profits could move into undeviating decline, recruitment specialists PageGroup and Hays experienced severe falls. PageGroup experienced a decline of 6.6 per cent, dropping to 372.8p, with Hays not performing much better with a fall of 6.2 per cent to 126.6p.

Deutsche Bank said that the outsourcing of recruitment has impacted the pot of obtainable gross profit, with simple demographics also seeming to add to the list of difficulties for agencies. Specifically referring to the UK, Deutsche said that the age group achieving the largest salaries, 40- to 54-year-olds, now represents a declining percentage of the total population.

Following a sharp deceleration of growth in the US arm of its business and provisional outcomes indicating many of its clients are operating with extreme caution when it comes to employment, SThree also dropped 8.4 per cent to 321.5p.

Deutsche Bank warned clients that there was a substantial possibility of an earnings correction after the UK, Germany and Japan all reported a sizeable number of job openings.

With bond earnings experiencing lows, insurers and banks are leading sales in this area and the wider market is following closely. There was a slump – the first for three weeks – for the FTSE 100, losing 1.9 per cent to stand at 6,115.76. Barclays diminished by 3.8 per cent to 169.4p, with Standard Life down 4.4 per cent to 316.2p.

Jupiter Fund Management lost 2.9 per cent, down to 424p, and Hargreaves Lansdown fell to £12.68, down 3.4 per cent. With the possibility of the UK EU referendum producing a leave or extremely close remain result, Citigroup recommended the sale of both stocks.

Citigroup said that the negative effect on markets from the uncertainty of either a tight remain vote or an outright leave vote certainly must not be undervalued. The flow of investors to the net retail equity fund in the UK has not only been negative for the year to date but has also deteriorated each month.

There was disturbance at Essentra’s healthcare packaging operations as the result of scheduled factory terminations. The company, which also manufacture cigarette filters, blamed this for its 6.7 per cent drop to 560p; however, there has been a tightening in regulations of tobacco in Asia, which currently makes up 60 per cent of Essentra’s business. This left analysts examining whether declining demand for filters overall is a deeper issue than Essentra is admitting.

Despite Medtronic winning a tax suit releasing approximately $3bn (£2.3bn) in cash that has, until now, been held in Puerto Rico, Smith & Nephew still dropped 2.0 per cent to £11.39. Meanwhile, Medtronic’s management has been minimising a long-speculated bid for S&N, with its 12-monthly procurement financial plan comprising just $1.5bn (£1.06bn).

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