One of the defining features of the past few years has been the continued rise of the US tech giants. In 2025, however, momentum in innovation appears to have started to shift towards the other side of the Pacific. Chinese technology firms, long viewed as playing catch-up, are now emerging as contenders in the global AI race. Leading this surge is DeepSeek, a Chinese startup that, on 24 January 2025, unveiled its R1 large-language model — reportedly developed at a fraction of the cost of similar models from US counterparts. Despite its modest budget, R1 is said to perform competitively,

The European cement sector has had a strong start to 2025 compared to its US equivalent. As the chart shows, European cement stocks have been outperforming the broader euro area market since January 2023; but this year’s growth has been particularly strong, with the Datastream euro area cement index climbing around 45% since January to reach a new all-time high on 14 March — while its US counterpart has only registered 3% growth in the same period. As a result, the total market value of the US cement index relative to the euro area cement index has shrunk, falling from

Faced with uncertainty over the new administration’s tariff policy, US stock markets are weakening. As outlined in Fathom’s Global Outlook, Spring 2025, European economies could also be hit hard due to American tariffs. However, despite this lingering threat, mid-to-large cap German stocks have outperformed (as have small caps, albeit to a lesser extent). Most recently, discussions of loosening a long-held ‘debt brake’ to boost defence and infrastructure spending has further supported financial markets in Germany. Across the Atlantic, tariffs on Canada, Mexico and China have resulted in a sharp decline in US stocks, as threats of a trade war and

The uplift seen in UK rent inflation data may help to explain recent rises in overall inflation numbers. Rent represents one of a number of slow-moving drivers — others include rail fares, water, and council tax bills. The ONS inflation numbers record the price of the stock of rental properties, but with tenancy contracts typically reset only once a year, it takes time for new market rates to surface. Hence, with an 8% weighting attached to rent price in the CPI, and 35% of UK households renting in 2023-24, such lagged indicators may explain continued above-target inflation in the short

European defence stocks have had a strong start to the year, with the Datastream euro area defence index climbing roughly 25% since President Trump’s inauguration in January. Both euro area and US defence stocks have outperformed their broader markets since the onset of the Russia-Ukraine conflict in 2022, but the euro area’s outperformance has accelerated amid the new president’s repeated calls for Europe to take greater responsibility for its own security. Mr Trump has told European NATO members they should raise defence spending to 5% of GDP, up from the current 2% target (which many European nations fall short of).

Defence was the main item on the news wires last week, with a blizzard of US initiatives: President Trump proposed Ukraine peace talks, reiterated demands for increased European military spending, and expressed hopes for a coordinated reduction in US, Russian and Chinese military spending further down the line. These announcements from the US appear to have caught the EU off-guard, and an emergency summit has been called by France to coordinate a response. Many European countries spend less than NATO’s 2% target. None spends more than Russia, with an outlay of $100 billion in 2023 (some estimates suggest that this

Amidst the barrage of new policies announced in President Trump’s second week in office was the decision to suspend foreign aid payments pending a 90-day review, and place the majority of the United States Agency for International Development (USAID)’s 10,000 strong workforce on leave. A federal court has since issued a ruling intended to block the latter measure, but the future of USAID remains uncertain. The US’s share of global foreign aid flows, as tracked by the OECD’s Development Assistance Committee (DAC), has come down since the USAID’s inception in 1961, but the US still stood for around 30% of

The ONS’s estimate of the number of payrolled employees in the UK fell by 47,000 in December, following a smaller decline in November. On the face of it, the sharp drop in payrolled employment was troubling. Adjusting for relative population sizes, it is equivalent to a fall of more than 200,000 in US non-farm payrolls, which is the kind of fall one might expect to see in the first month of an NBER recession. In the wake of October’s Budget, we revised down our forecast for near-term growth, to include a period of stagnation through 2024 Q4 and 2025 Q1.

Markets in countries at risk of US tariffs may have been pricing in risks for some time — equities in China, Mexico and Canada have all underperformed MSCI World since before the election. However, the performance of these countries’ equities last week suggests that investors are starting to become a little less worried. US president Donald Trump last week said he might impose a 10% tariff on China, starting in February — much less than the 60% Mr Trump threatened during his election campaign. At the same time the US president also said he was minded to impose a 25%

U.S. Treasury bonds are considered safe, convenient, and easy to trade, making them the preferred choice over other low-risk investments. Their yield is relatively low but this ‘convenience yield’ reflects the implicit premium that investors are willing to pay to hold Treasuries, compared to less liquid assets like AAA corporate bonds. This yield typically peaks during recessions or indeed before (such as before the 2001 dot-com crash). In recent years, the rotations of the convenience yield and of the equity market have continued to respond to the same underlying economics The key driver behind this is whether investors expect earnings

Refresh this chart in your browser | Edit the chart in Datastream UK bond yields are rising, causing pain for borrowers, including the Treasury and UK Chancellor Rachel Reeves. This rise limits the UK’s fiscal space, while curtailing economic growth. Without the latter, the former gets even tighter. Breaking this cycle is going to be a huge challenge for the UK government and Chancellor. Bond yields are rising for a variety of reasons including international factors, and in particular a recalibration of investors’ expectations about the pace and magnitude of policy tightening by the US Federal Reserve. But inflation in the UK

New data from Nationwide reveal that UK house prices increased by nearly 5% in 2024 but remain below their 2022 peak. Relative to income, prices are still nearly 9% lower now than they were then, as the chart below shows. The central scenario in Fathom’s Global Outlook, Winter 2024 sees the path for UK interest rates remaining ‘Higher for longer’; and accordingly we expect the house-price-to-income ratio to continue drifting lower, restraining high levels of house-price inflation. We also estimate that if Labour were to succeed in its ambitious plan to build 1.5 million new houses by 2029, around 5%