The US gets a $3.3tn tax cut through and we can’t even do $5bn in welfare reform. And you wonder why our capital markets are broken...it goes way deeper than the limit on your cash ISA being too high.

The US Senate approved their version of Trump’s massive tax bill – now it goes back to the House of Representatives where it may not pass in its current form. Fiscal hawks and moderates scared of cutting health care may mean it’s got some ways to go, but it’s getting there. Stocks in the US ended the day mixed as investors rotated out of tech and into some more defensive names with the tax bill, tariffs and rate cuts in focus.

Meanwhile, back here, the British government gutted its welfare bill to nothing – humiliated it seems. This puts serious doubt in the minds of bond investors who are looking at the UK’s fiscal position and its credibility. Higher taxes seem inevitable. We’ve seen a sustained widening in the spread between UK bond yields and the rest of the G7 since the election – this came in a bit after the Spring Statement but the failure to cut spending renews fiscal risk.

More bad news for Britain’s stock market – apparently the largest company we have, AstraZeneca, wants to move its listing to the US. Given the valuation gap with US peers, the size of the US drugs market and the impetus from Trump for multinationals to be more US-oriented to avoid tariffs, it makes perfect sense. Scrapping cash ISAs is not going to help much. The focus needs to be on pensions, not on people’s savings. AZN shares popped yesterday afternoon on the report. The FTSE 100 was trading a little higher this morning after pushing up 0.3% yesterday as bulls attempt to reclaim the 8,800 handle.

Elsewhere...Fed chair Jay Powell trolled the Donald by saying rates would be lower if it weren’t for tariffs, reiterating that the US central bank is waiting for more data before doing anything further. Inflation pressure could rise this summer and the US economy was in good shape, Powell said, though he refused to rule out rate cuts for the July meeting.

Later in the day, stronger data boosted yields further. The 2-year US treasury yield ended the day up five basis points to 3.77%. The 10-year yield rose only a few basis points to 4.25% after US Treasury Secretary Bessent said earlier this week that he wouldn’t boost long term treasury issuance at current yield levels.

Pushing up yields, the June ISM Manufacturing PMI was out at 49 in June 2025 from 48.5 in May, slightly stronger than 48.8 consensus expectations. US job openings rose by 374,000 to 7.769 million in May 2025, exceeding expectations and reaching the highest level since November 2024. Put squarely, if the labour market holds up the Fed won’t be in a rush to cut, which will create a headwind for megacap tech names. ADP jobs today, nonfarms tomorrow ahead of the July 4th holiday.

On the looming July 9th tariff deadline – the EU is set to be ready to toughen its stance on trade talks this week, while Trump threatened to raise tariffs on Japan and signalled he would not extend the deadline for the pause on reciprocal tariffs. “We’ve dealt with Japan. I’m not sure we’re going to make a deal. I doubt it.,” said Trump. The Nikkei 225 in Tokyo declined 0.6% and other Asian indices were broadly lower, except the Hang Seng, which rallied after coming back from a holiday. European stock markets were broadly flat early on Wednesday after the DAX fell 1% on Tuesday as defence names pulled back.

As previously flagged there is a high degree of uncertainty around trade and tariff talks ahead of this deadline, when the 90-day pause on reciprocal tariffs runs out and we have seen the market pull back a touch.  I don’t think that the S&P 500 at ATHs reflects this risk properly but the market is looking through the wall of worry.

The Nasdaq and S&P 500 closed lower, just a fraction off their all-time highs struck on Monday, weighed by weakness in large-cap tech stocks with Nvidia –3% and Microsoft –1%. Tesla slipped 5% lower as CEO Elon Musk resumed his spat with Donald Trump, who even suggested the White House could look at deporting him.

Investors instead rotated into healthcare – Amgen, UnitedHealth, Merck and Johnson & Johnson all notching solid gains for the day, pushing the Dow Jones up 400pts even as the S&P 500 fell 0.1% and the Nasdaq shipped 0.8%.

Question is whether that secular AI tailwind for big tech has run its course – can the post-Liberation Day rally broaden out enough to be sustained?

17 S&P 500 stocks hit 52-week highs yesterday and 8 hit all-time highs, including Royal Caribbean, CrowdStrike and Intuit.

Companies

It ain’t half hot: Greggs blamed the hot weather for softer sales and said full year profits may be below last year’s. The baker reported half-year sales of £1.03 billion, up 6.9% YoY, or 2.6% on a like-for-like basis.

This indicates a material softening in June – the company had reported 7.4% total and 2.9% LFL growth in the first 20 weeks of the year. June sales "were impacted as very high temperatures affected the UK, increasing demand for cold drinks but reducing our overall footfall". Who wants a searing hot steak bake when it’s 32 degrees? Shares fell 15% on investors' fears about the baker being past its best.

SSP shares rallied 8% as the caterer revealed a £1.2bn valuation for its TFS joint venture subsidiary in India, which it is spinning off.