Daily market update: Admiral, AstraZeneca, Centrica

“Higher than expected government borrowing pushed up UK gilt yields and pulled down the UK stock market,” says Russ Mould, Investment Director at AJ Bell.

“10-year gilt yields briefly nudged up to 4.645%, which is the market’s way of saying it isn’t impressed with the state of public finances. Soaring debt interest payments haven’t helped and the situation will further stir speculation that the government will have to put up taxes in the Autumn Budget.

“Housebuilders were knocked by the public sector finance figures as the rise in gilt yields suggests the market believes interest rates could stay higher for longer. Housebuilders are desperately waiting for rates to come down as that could make mortgages more affordable and help more people get on the property ladder.

“Banks also fell on the news as the prospect of a tax hike is negative for consumer and business sentiment, potentially leading to more hesitance around borrowing money.

“Admiral was one of the top fallers on the FTSE 100 after the financial regulator said it is looking hard at the insurance industry and implied it would get heavy with firms involved in poor practices. The FCA expressed concern about the cost of paying for insurance premiums monthly and that claims weren’t being handled promptly and fairly.”

AstraZeneca

“The UK government will be kicking itself that AstraZeneca has decided to invest $50 billion in the US as Blighty will miss out on associated economic benefits. That money, if invested in the UK, would have created a large number of jobs and help shine a light on the country for scientific excellence.

“AstraZeneca pulling out of a £450 million vaccine plant expansion in Liverpool earlier this year was the big clue that it was losing patience with the UK government. At the time, it hinted that without a certain level of support, it wasn’t financially viable to invest that money. The previous government had pledged £90 million in grants and other aid, but the support was cut when Labour came to power.

“Chief executive Pascal Soriot implied at the time that AstraZeneca wasn’t wedded to a particular country and that it would invest wherever it made financial sense.

“Trump’s new tariff regime might have influenced the decision for the UK drugs company to spend big in the US. AstraZeneca last year announced a $3.5 billion investment in the US a week after Donald Trump won the presidential election. That might have been seen as a show of good faith. Now we’ve got the big commitment that should put AstraZeneca on Trump’s Christmas card list.

“Trump still hasn’t provided the full details on tariff rates for foreign pharmaceutical products sold into the US. AstraZeneca already has a significant presence in the US which should help it to minimise tariff exposure, and the new investment should strengthen that position further.

“The company expects to generate half of its sales in the US by 2030, up from 44% in 2024. The more business it does in the country, the greater the likelihood that investors might push for AstraZeneca to switch its main stock listing to the US. That would be bad for the UK stock market as it is one of the biggest names in the FTSE 100.”

Centrica

“Centrica’s shares got a boost after it announced a deal to buy a 15% stake in the Sizewell C nuclear plant.

“The company called it a ‘compelling investment’ for shareholders and the UK, and the market certainly likes the fact it is playing a major role in this important energy generating asset.

“The overall cost of the project is another matter. Sizewell C might generate a significant amount of jobs and generate enough energy to power 6 million homes, yet its overall cost has nearly doubled from the previous estimate to now stand at £38 billion.”