Interactive Investor

Must read: China boost, UK jobs data, vet sector probe latest

Our head of investment rounds up the morning's big news.

12th March 2024 09:15

Victoria Scholar from interactive investor

      GLOBAL MARKETS

      European indices have opened higher with the FTSE 100 leading the charge. China sensitive stocks on the UK blue-chip index are staging gains, with Prudential (LSE:PRU) and Standard Chartered (LSE:STAN) both up over 2.5%. Meanwhile, Persimmon is languishing at the bottom of the basket after profits more than halved last year.
       
      Overnight, China enjoyed a strong session with the Hang Seng surging by more than 3%. However, the Nikkei came under pressure, retreating from recent highs after a strong corporate inflation reading in Japan raised concerns about a possible end to rock bottom interest rates.

      Focus is on the US CPI inflation reading today which is expected to hit 3.1% in February, in line with the previous month. The monthly figure is seen ticking up to 0.4% versus 0.3% in January.

      UK LABOUR MARKET REPORT

      The UK unemployment rate between November and January hit 3.9%, up versus last year and slightly worse than economists had pencilled in for a figure of 3.8% as the weak economic backdrop weighs on labour demand. More than half a million more people are out of work since before the pandemic, potentially partly because of an increased number of people suffering with long-term sickness.
       
      Job vacancies have been on the decline for nearly two years. Between December and February, vacancies hit 908,000, down versus nearly a quarter of a million last year. Businesses continue to express caution when it comes to taking on additional expensive long-term fixed staffing costs.
       
      Pay grew by 6.1% excluding bonuses, or 5.6% including bonuses, still strong but below recent record growth rates and the sixth straight monthly slowdown. Thanks to the drop in inflation though, workers have enjoyed positive real terms pay growth for the last seven months.
       
      Wage growth, although weakening slightly, remains relatively robust which may not be enough for the Bank of England. The central bank has made it clear it wants to see significant evidence that pay growth is slowing before cutting interest rates. Nonetheless, it still looks like a summer rate cut is on the cards.

      CMA VETERINARY SECTOR INVESTIGATION

      Last September the Competition and Markets Authority (CMA) launched a review into the veterinary services sector and multiple issues cropped up. The antitrust watchdog now plans to start a formal investigation into the sector.
       
      Shares in Pets at Home Group (LSE:PETS) and CVS Group (LSE:CVSG) have plunged today in response to proposals from the CMA. CVS is trading down by more than 20%, landing the stock down around 36% over the last year, and Pets at Home is also under pressure.
       
      Pricing was among the issues raised, affecting up to 16 million pet owners in the UK. The CMA found no pricing information available on over 80% of the vet practises’ websites it checked. Another big issue flagged was a lack of competition, with six large corporate groups accounting for almost 60% of practises in the UK, many owned by private equity, with a single group often owning multiple practises in the same area. This can result in reduced competition and choice for consumers. The CMA said that in 2013, 10% of vet practises belonged to large groups, a figure that has now risen to 60%.  
       
      The regulatory probe into the veterinary market is likely to be a major overhang for stocks in the sector like Pets at Home and CVS in the months ahead. The CMA is likely to further investigate the pricing power of the largest vets as well as the fact that customers find it difficult to easily access to price lists and prescription costs. It is also likely to investigate the need for a potential regulatory overhaul given that existing regulations are probably outdated, dating back to 1966.

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