As France is in political turmoil, the London Stock Exchange has reclaimed its throne from Paris to once again become Europe’s largest stock market by market capitalization.
The total market capitalization of all companies listed on London’s market reached $3.178 trillion as of Monday’s close, surpassing Paris’s $3.136 trillion, according to Bloomberg data.
London has seen its flagship stock index, the FTSE 100, hit record highs in recent months, buoyed by calming inflation, increased takeover activity and potential initial public offerings, with Brexit now a thing of the past.
“(President Emmanuel Macron’s) decision to plunge his country into political chaos has spooked French investors,” said Danny Hewson, head of financial analysis at stockbroker AJ Bell.
Until this week, Paris had been Europe’s largest stock market since the start of 2023, after briefly taking the top spot in the second half of 2022.
– The rise of the far-right –
Paris’ benchmark stock index, the CAC 40, fell more than 6 percent last week after Macron called early elections following a surge in support for the far-right in EU parliament polls.
That erased gains so far this year and marked the index’s worst weekly performance since March 2022, shortly after Russia invaded Ukraine.
France will hold its first parliamentary elections on June 30th and its second elections on July 7th.
Macron’s centrist coalition is currently third in the polls behind the far-right National Rally (RN) and a new left-wing coalition called the New Popular Front, and with less than two weeks to go until the election, it will face an uphill battle to close the gap.
Investors fear that tax cuts by the far right or a rollback of pension reforms by the left could seriously damage France’s finances.
Growth in London’s stock market has stagnated in recent years, partly due to Britain’s departure from the European Union at the start of 2021.
London, currently the world’s sixth-largest stock market by market capitalization, is performing well ahead of the UK general election on July 4, in which the main opposition Labour Party is expected to defeat Chancellor Rishi Sunak’s ruling Conservative Party.
“Labour’s stable polling lead in the UK means a change of government is all but priced in,” Hewson added.
The London Stock Exchange has raised 18.8 billion pounds of equity capital so far this year, more than Frankfurt, Paris, Milan and Stockholm combined, an LSE spokesman told AFP.
– Paris’ ‘weak’ recovery –
Meanwhile, the Paris stock market attempted an unconvincing and weak recovery on Tuesday.
“The risk aversion that was fuelled by fears that the far right would take control of legislation in France has eased somewhat but the recovery in Paris-listed stocks has been muted,” said Susanna Streeter, head of money markets at Hargreaves Lansdown.
But, she added, “there is a slight hope that if there is no absolute majority and Parliament is left in limbo, the spending promised by the National Coalition Party will actually be cut.”
Euronext, the stock exchange operator with offices in Amsterdam, Brussels, Dublin, Lisbon, Oslo, Paris and Milan, declined to comment on the French capital losing its top spot.
Jean-Charles Simon, head of Paris Europlace, which promotes Paris as a financial centre, argued that the battle for dominance with London was not over yet.
“The two stock markets are very close in valuation but Paris has significantly closed the gap in recent years,” Simon told AFP.
Like London, Paris, where stock prices have hit record highs again this year, has also suffered from a sharp drop in shares in French luxury goods giant LVMH, which has fallen by almost a fifth in the past 12 months due to sagging demand in China.
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