Key Points

• Stocks post slim gains as investors shrugged off Moody’s US downgrade, bond yields retreat from peaks

• Trump said Ukraine and Russia would start ceasefire negotiations “immediately”

• Vodafone sees growth phase, Greggs beats expectations, Diploma soars

• Asian markets up on China rate cut, European stock markets drift higher with DAX crossing 24k

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Big picture: Bond yields jumped but then retreated from their peaks and stocks eked out a small gain in New York and in London. The FTSE 100 rose 0.17%, while the S&P 500 was up a meagre 0.09% nevertheless its sixth straight day in the green after opening weaker on the Moody’s report. It was a sign perhaps that investors remain overly sanguine about the fiscal outlook in the US. I still expect volatility to pick up as we head into June and the second half of the year.

European stock markets rose early Tuesday after a stodgy performance on Monday. Investors seem keen to see the glass half full with the prospect of Ukraine peace talks, Iran nuclear deals and tariff rapprochement winning out over concerns about the US fiscal position and possible re-escalation of trade wars.

The UK and EU agreed to reset post-Brexit relations, including energy, defence, and fishing rights until 2038. Skinny deal but obviously net positive economically. PMI figures, expecting less contraction in manufacturing and services, are due Thursday. Tomorrow’s April inflation report may see CPI rise to 3.3%, with core CPI at 3.6%.

It’s not ally peaches and cream on the trade war front still. China accused the US of undermining the Geneva consensus on chip export controls, urging correction and warning of measures if the US persists, referring to the Trump administration’s warning that using Huawei Ascend chips violate export controls.

But things might be improving regards the war in Europe. Trump said Ukraine and Russia would start ceasefire negotiations “immediately” after his call with Putin...seems to be increasing the pace of things but what concrete steps are there?

Asian stock markets picked up after Chinese banks lowered their benchmark lending rates for the first time in seven months, following the PBoC’s decision to reduce its key one- and five-year lending rates by 0.1% each to new lows.

Vodafone says it’s entering a phase of sustainable free cash flow growth. Shares have languished for years now – could we have seen a bottoming in Germany services revenues declines? Germany revenues were down 5% against a 1.9% rise in the UK. Total revenues rose 2% while adjusted earnings were a whisper short of expectations. Three merger in the UK is likely to be initially dilutive to free cash flow due to timing of investment. Two bn euro buyback announced.

Greggs delivered a trading update for the first 20 weeks of 2025 with like-for-like sales up 2.9%, ahead of the market’s expectations around +2%. Performance seemed to pick up after sales rose +1.7% in first nine months of the year and +2.5% in Q4 2024.

Diploma shares soared 15% or so after it reported very strong organic revenue growth of 9% in the first half of its financial year. Margins up 190bps, EPS +23%, positive momentum into the second half...A* for this one.

Elsewhere...Fed officials Jefferson, Williams, and Kashkari highlighted tariff-related uncertainty. AtlantaFed boss Raphael Bostic said the number of rate cuts depends on tariff details, leaning towards only one cut this year due to the time needed to assess tariffs.