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Prospects for staffing agencies look rosier after a robust trading update from Michael Page triggered a revival in recruitment shares.

The company reported a 38% rise in fourth-quarter gross profit on strong demand for candidates, sending its shares up 9% to 270.5p.

The news lifted many other listed recruitment stocks including a 6.5% rise in Hays' shares to 112.5p; and 6% increase in Robert Walters' price to 163.75p.

Michael Page increased full-year gross profit increased by 37% to £478 million. Growth slowed to 15.6% in the last three months of the year against an average 20% in the previous three quarters. However, investors should be pleased with the latest achievement in light of more volatile economic conditions.

The company said in a statement that during the fourth quarter, save for some weakness in specific banking sectors, the UK business continued to experience good levels of activity across all other disciplines and industry sectors.

Chief executive Steve Ingham said: 'These results are testament to our organic growth strategy of increasing the diversification of our business both geographically and by discipline.'

Shares in the recruitment sector fell sharply in the second half of 2007 as investors worried about a market slow down in hiring.

Michaal Page has seen its shares fall more than 7% since the start of January on talk of a recession in the US and a sharp slowdown in the UK economy.

Overseas business continues to grow with 61% of annual gross profit now generated outside the UK.

In Asia Pacific, fourth-quarter gross profit rose 30.6%. Page said its Asian business has experienced some weaknesses in specific banking sectors but still recorded fourth-quarter gross profit rise of 26%.

Business in the US increased by 81.6% gross profit in the last three months of the year.

Michael Page's Americas business saw a rise of 81.6 pct in fourth-quarter gross profit.

'The overall tone of the statement was upbeat and was backed up by a further increase in headcount during the fourth quarter of 275 or 5.8%,' said Landsbanki analyst Ian Jermin. 'Such a result and statement does not sit well with the 60% fall in the share price since July and ought to result in a strong bear squeeze this morning.'

David O'Brien, analyst at stockbroker Altium, reiterated his 'buy' rating on the stock, despite warning that higher staff numbers would put pressure on costs. He said: 'The trading update contains fuel for the bulls as well as the bears. The latter will hardly be surprised by the report that there are signs of 'some weakness in specific banking sectors' in the UK and Asia.

'However, the bulls will take some comfort that in spite of this progress in net fee income was ahead year-on-year in 2007 vs. 2006 (37% vs. 30%) and highlights the geographical diversification of the business.'