Big Picture: US stocks are green for the year – the S&P 500 now in positive territory for 2025, just. This may reflect some healthy rotation in more defensive, good balance sheet companies that don’t require a rate cut and whose valuations were not too heavy - the Nasdaq remains down 1.5% for the year, while small cap Russell 2k is still –5%.

Given this we are going to start with the US today.

US inflation – Still no sign of an inflation spike in the latest US CPI data. CPI Apr YoY +2.3% vs +2.4% est. MoM +0.2% vs +0.3% est. Core CPI YoY +2.8% as expected.The 2.3% annual inflation rate was the lowest since 2021.

It’s very hard to get a read on this now after a whirlwind last month and some tricky comparisons. Any inflation impulse from tariffs was going to emerge in the May/Jun data, but the pause means whatever that is could be roundly ignored. It means it will take some months before we get a really clear handle on inflation. Combined with the tariff pause, the lack of visibility on inflation probably means the Fed stays on hold for longer, unless there is some nasty surprises in the labour market data or we get some other kind of exogenous shock.

Nevertheless, the weaker-than-expected inflation eased concerns about the Fed’s and the market’s biggest fear – stagflation. That allowed the market to broadly continue its risk-on rhythm on Tuesday with the S&P 500 now turning positive for the year, hitting its highest level since February, when it struck its all-time high. The S&P 500 rose 0.72%

The Nasdaq Composite added 1.61%, boosted by a 5.6% jump for Nvidia on news it is sending 18,000 advanced chips to Saudi Arabia. The Dow though fell after an 18% drop in shares of UnitedHealth, which had been a big index weighting.

The Mag6 (the Seven minus Tesla) are now trading at their lowest relative to the rest of the S&P 500 since 2017.

UK

The FTSE 100 was flat in early trade in London after a pretty turgid session on Tuesday. Aviva's £3.7bn acquisition of Direct Line faces competition probe, which didn’t seem to worry investors as shares in both picked up a bid in early trading.

GSK is building its pipeline via acquisitions, announcing today a $2 billion acquisition of efimosfermin, a drug to treat and prevent progression of steatotic liver disease.

Burberry: more alterations required. The company updated its turnaround plan with “people-related costs” being cut...ie 1,700 jobs to go by 2027. Sales fell 12% versus an anticipated 13% decline. Revenues of £2.461 billion were ahead of an estimated £2.451 billion. Fourth-quarter sales were down 6% vs 7% expected, which could be a sign of positive momentum – shares jumped 9% on the update as investors can see some clarity and progress.

Yesterday, the FTSE 100 closed nearly unchanged, down just 0.02%, pausing after recent gains amid mixed corporate and economic signals. Entain soared 6% following a UBS upgrade, but AstraZeneca (-0.8%), HSBC (-0.4%), and Unilever (-1.4%) weighed on the index. UK unemployment rose to 4.5%, reinforcing expectations of potential rate cuts by the Bank of England.