Why Paris now holds the top spot in the stock market, as opposed to London
As worries about the UK entering a recession weigh on British companies, London has lost ground to Paris as the largest stock market in Europe. This effectively indicates that the market capitalization of the London Stock Exchange, or the total value of all stocks listed, is smaller than the market capitalization of the stocks listed on the Paris Stock Exchange.
How do the two markets’ market caps compare?
Bloomberg estimates that all shares listed on the Paris Stock Exchange are worth $2.83 trillion, compared to $2.821 trillion for all shares listed on the London Stock Exchange, which was previously the most important exchange outside of Wall Street.
While France has been catching up for some time, this year has been especially awful for shares in UK medium-sized companies as consumers cut back on their spending and businesses struggle with rising prices.
The FTSE 250 share index in London, which represents mid-sized businesses with a UK emphasis, has declined by about 17% over the past 12 months.
Why does the UK experience more hardship than other countries?
As the UK economy begins to contract, a recession looms. Markets can expect financial delivery from us, Sunak claims. Mitchells and Butlers, a chain of pubs, was one of the largest losers in the past year, losing more than 37% of the value of its stock. Retailer Marks & Spencer is down 40%, and gaming business 888 is down 70%.
In the wake of Liz Truss’s mini-Budget, the pound hit a record low, which has hurt UK businesses as well. Importing commodities and raw materials has become more expensive.
Although less dramatically, the euro has also dropped in value relative to the dollar. The luxury goods producers in France, who have experienced a recovery in Chinese demand, have also helped to strengthen the French stock market.
In the past six months, shares of LVMH, the company that owns the fashion label Louis Vuitton, have increased 22%, while those of Hermès have increased 37%.
Prior to the epidemic, according to Bloomberg data, Chinese consumers accounted for about 35% of the world’s demand for upscale goods.
“London’s loss of the top spot by stock market valuation to Paris will be seen as a blow to the City’s prestige,” Russ Mould from AJ Bell investors told the BBC.
“Since the [Brexit] vote in June 2016, Paris’ CAC-40 index is up 47% and London’s FTSE 100 has advanced by just 16% – but the gap is not down to Brexit alone. The London market is more heavily exposed to unpredictable sectors such as miners and oils; ones that have struggled in a zero-interest rate environment such as banks and insurers; and ones which can be seen as dour plodders, such as utilities and telecoms,” Mr Mould added.
