France’s stock market has surpassed Britain’s as the most valuable in Europe, according to available data.
According to Bloomberg data, a weak pound, fears of a recession in the United Kingdom, and rising sales at French luxury goods manufacturers are believed to be behind the shift.
Paris has surpassed London for the first time since records began in 2003.
It follows predictions that the British economy will enter a recession this year, although the French economy is also under pressure.
Bloomberg calculates that the total value of British shares is approximately $2.821 trillion (£2.3 trillion), while the value of French shares is approximately $2.823 trillion.
It represents a dramatic reversal of fortune for the London Stock Exchange, which in 2016 was worth approximately $1.4 trillion more than its Parisian rival.
France has been gaining ground for some time, whereas shares of British medium-sized companies have performed particularly poorly this year, as consumers cut back on spending and businesses struggle with rising costs.
In the past year, the FTSE 250 share index, which is comprised of medium-sized companies focused on the UK, has declined by nearly 17%.
The pub chain Mitchells and Butlers has lost over 37% of its share value in the past year, making it one of the biggest losers. The gambling company 888 has declined by 70%, while the retailer Marks & Spencer has declined by 40%.
Since Liz Truss’s mini-Budget, the decline in the value of the pound has made it more expensive for British businesses to import goods and raw materials.
However, the euro’s decline against the dollar has been less severe than the pound’s. The French stock market has also been bolstered by its luxury goods manufacturers, whose demand from China has rebounded.
In the past six months, shares of LVMH, which owns the fashion brand Louis Vuitton, have increased by 22%, while those of Hermès has risen by 37%.
According to Bloomberg data, Chinese consumers accounted for approximately 35% of the global demand for luxury goods before the pandemic.
“London’s loss of the top stock market valuation slot to Paris will be viewed as a blow to the City’s prestige,” said Russ Mould of AJ Bell investors.
“Since the [Brexit] vote in June 2016, the CAC-40 index in Paris has been up 47% while the FTSE 100 index in London is up only 16%; nevertheless, this disparity is not solely attributable to Brexit. The London market is more heavily exposed to volatile sectors, such as miners and oil; sectors that have struggled in a zero-interest rate environment, such as banks and insurers; and sectors that are viewed as dull plodders, such as utilities and telecommunications “Mr. Mould added.
A downturn looming
This year, energy and food prices in the United Kingdom have increased in part due to the conflict in Ukraine.
As a result of the mini-Budget-induced increase in UK borrowing costs, many British homeowners have also experienced a substantial increase in mortgage rates.
According to experts, it has exerted pressure on consumer spending and exacerbated existing economic issues, such as the decline in international trade since Brexit. The United Kingdom’s GDP remains smaller than it was before the pandemic.
The economy contracted by 0.2% between July and September, and the Bank of England has warned the UK is facing its longest recession since records began.
Last year, Amsterdam surpassed London as Europe’s largest financial trading center, based on the total value of traded shares rather than firms.
