London Overtakes Paris in Stock Market Value
London’s stock market has surpassed Paris as concerns mount over the outcome of France’s upcoming parliamentary elections. According to Bloomberg’s data compiled on Monday, all stocks listed in the United Kingdom now total approximately $3.18 trillion, slightly ahead of the $3.13 trillion total for French-listed shares.
Despite Paris’s CAC All-Share index marginally exceeding London’s FTSE equivalent on Tuesday, the UK’s market value now represents 98% of the combined market value of UK-listed shares.
The resurgence of London as Europe’s largest equity market is primarily attributed to French President Emmanuel Macron’s decision to call for snap elections following his party’s defeat by the French far right in European Union lawmaker elections, noted Axel Rudolph, a senior market analyst at trading platform IG Group.
“Financial markets don’t like uncertainty, and the fact that you’ve had such a shift to the right in the French European elections has led people to worry,” Rudolph stated.
Since the announcement of the snap elections, France’s leading stock index, the CAC 40, has seen a decline of over 5%, amounting to a loss of $160 billion. Investors are concerned about the potential influence of the far-right National Rally in Europe’s second-largest economy.
A recent opinion poll by research firm OpinionWay revealed a significant level of support for the National Rally, with 32% of respondents intending to vote for the party in the first round of elections.
French banking stocks have been particularly affected by the political uncertainty, with shares in major banks such as Société Générale, BNP Paribas, and Credit Agricole experiencing significant declines.
Investors fear that a National Rally-dominated parliament could introduce measures detrimental to banks, potentially impacting the country’s public debt, which stands at 110.6% of gross domestic product. A divided assembly may struggle to address France’s budget deficit, which reached 5.5% of GDP last year.
In contrast, UK financial markets appear relatively stable amidst preparations for the general election on July 4. With Brexit uncertainties subsiding and the economy emerging from a short recession, investors are showing interest in UK stocks, attracted by their favorable valuations compared to US stocks.
Meanwhile, the National Rally in France has promised to increase public spending and reduce VAT on electricity and fuel if elected, further heightening concerns among credit ratings agencies.
Despite downgrading France’s long-term credit score last month, S&P expects the country’s budget deficit to remain above the targeted 2.9% of GDP, prompting continued scrutiny from investors and economists alike.
