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London overtakes Paris as the biggest stock market in Europe

London has regained its crown as Europe’s biggest stock market, just two years after losing that status to Paris.

French stocks have suffered from the shock election called by President Emmanuel Macron last week which hit bank shares in particular.

Meanwhile, London shares after a long period in the doldrums are showing renewed signs of life with bankers saying clients are looking to get deals moving again, leading to floats and share price boosts.

The FTSE 100 is up 7% in the last year and today rose 5 points to 8150.

French stocks are now collectively worth about $3.13 trillion, narrowly losing out to the UK at $3.18 trillion. The CAC 40 Index has lost all its gains for 2024.


Investors say that stability – steady inflation and interest rates and the clear likelihood of a Labour victory in the coming election – at least give them some confidence about what is coming next,

Bloomberg first reported the shift this morning.

“We like UK stocks for valuation reasons but also as a portfolio diversifier given their attractive sector profile,” said Ulrich Urbahn, head of multi-asset strategy and research at Berenberg.

“On top of that, the political uncertainty seems to be higher elsewhere, at least for the moment.”

City analysts say that whatever happens in French politics, the likelihood is that no clear majority winner emerges from the elections.

Mark Haefele, Chief Investment Officer, UBS Global Wealth Management, says:

“Regardless of which scenario comes to pass, we think that France’s fiscal situation will remain challenging under EU fiscal rules, putting serious constraints on any government’s fiscal headroom.”

While political experts have criticised the lack of difference between the Labour and Conservative Party on future tax policy, at the moment that is seen as preferable to other European markets.

Dean Turner at UBS Global Wealth Management, said: “As there is little to distinguish between the two main parties from a macro perspective and little movement in the opinion polls, we continue to expect minimal impact on UK assets from the result. We retain our most preferred rating on UK equities.”

Others note that the French market is highly dependent on global luxury brands, lately under pressure.

Richard Hunter at ii said: “A strong reliance on LVMH shares, down by 18% over the last year, and a week of punishment which saw the main index fall by 7% given political uncertainty have weighed heavily on fortunes for the French market.

At the same time, after a considerable time in the investment doldrums, there are increasing signs that the UK is gaining some favour among overseas investors given its mix of stable, cash generative companies which are cheap by comparison by historic standards. The FTSE100 rose to record highs last month, while there are some tentative signs of increased IPO and M&A activity which could yet provide further froth.”

Russ Mould at AJ Bell said: “Merger and acquisition activity is helping to highlight the value that exists on the London market, as financial and trade buyers swoop for bargains, and this may be another case of the old market saying that the best cure for low prices is low prices, because they ultimately attract buyers.

The UK has more to commend it, too, in the form of an independent central bank, the huge City ecosystem of advisers, bankers, brokers, lawyers and accountants, rule of law and, from the point of view of would-be overseas buyers, a cheap currency -- or at least one that is yet to recapture the ground lost in the immediate wake of the Brexit vote eight years ago.”