London Stock Exchange Reclaims Top Spot in Europe as Political Instability Hits Paris
The London Stock Exchange (LSE) has reclaimed its position as Europe’s largest stock market by valuation, overtaking Paris due to recent political turmoil in France. According to Bloomberg data, the combined market capitalization of London-listed companies reached $3.178 trillion at the close on Monday, surpassing Paris’s $3.136 trillion.
London’s resurgence is attributed to several factors: cooling inflation, increased takeover activity, and potential flotations. These developments have propelled the FTSE 100 index to record highs, marking a post-Brexit recovery phase.
Impact of French Political Turmoil
Danni Hewson, head of financial analysis at AJ Bell, noted that French investors were jolted by President Emmanuel Macron’s decision to call a snap election, which has led to significant political instability. The CAC 40 index in Paris slumped more than 6% last week after the announcement, erasing gains made earlier in the year. This was its worst weekly performance since March 2022, shortly after Russia invaded Ukraine.
The legislative elections in France, set for June 30 and July 7, have further fueled investor anxiety. Macron’s centrist bloc is currently trailing behind the far-right National Rally (RN) party and a new left-wing alliance, the New Popular Front. The prospect of either tax-cutting policies by the far-right or the repeal of pension reforms by the left has raised concerns about the potential deterioration of French public finances.
London’s Steady Growth and Political Stability
In contrast, London has been experiencing a period of relative stability and growth. Despite lagging behind in the years following Brexit, the LSE has attracted £18.8 billion in equity capital this year, surpassing the combined total of Frankfurt, Paris, Milan, and Stockholm. The upcoming UK general election on July 4, where the Labour party is forecasted to defeat the ruling Conservatives, has already been largely priced into the market, contributing to a stable investment environment.
Paris’s Attempted Recovery
Despite the political upheaval, Paris attempted a recovery on Tuesday. However, the rebound was described as unconvincing by Susannah Streeter, head of money and markets at Hargreaves Lansdown. Concerns about the far-right gaining legislative power have eased slightly, but the market remains wary.
Jean-Charles Simon, head of Paris Europlace, insists that the competition with London is far from over. He highlighted that the valuations of the two markets are still very close, and Paris has made significant gains in recent years.
The sharp decline in the share price of French luxury goods giant LVMH, which has dropped nearly 20% over the last 12 months due to dampened Chinese demand, has also contributed to the market’s struggles.
As the political and economic landscapes continue to evolve, the battle for stock market supremacy between London and Paris remains dynamic and closely watched by global investors.
