Recent political turmoil in France has seen Paris lose its position as Europe’s largest stock market to London, less than two years after it overtook the UK.
The market value of French companies – according to Bloomberg – was hit hard by President Emmanuel Macron’s sudden announcement of early elections, which led to a loss of nearly $258 billion last week alone.
Shares of major French banks, including Société Générale, BNP Paribas and Credit Agricole, fell by more than 10%, the agency said.
Currently, the collective market value of French stocks is about $3.13 trillion, slightly less than $3.18 trillion in the United Kingdom, according to Bloomberg data, after the French CAC 40 index – which reached record levels just one month ago – erased all its gains for 2024.
Market uncertainty and investor sentiment
Alberto Toccio, portfolio manager at Kairos Partners, in an interview with Bloomberg, highlighted the period of uncertainty that could last for weeks, which could lead to further instability in the market.
Conversely, Bloomberg said several factors, including improved global growth and increased merger activity, made British stocks more attractive to investors. The upcoming general elections in the United Kingdom are expected to produce a stable result, with the opposition Labor Party leading the opinion polls by a large margin.
Ulrich Urban, head of multi-asset strategy and research at Berenberg, noted that UK stocks are attractive for valuation reasons and as a portfolio diversifier due to their attractive sector profile. He also indicated – in statements to Bloomberg – that political uncertainty is currently higher in other regions.
England’s FTSE 100 index reached all-time highs this year, driven by export-oriented stocks such as Shell and Unilever. Over the past three months, the index has significantly outperformed the European Euro Stoxx 50 index, and Rolls-Royce topped the list of gainers.
Challenges and warnings in France
In France, market strategists remain cautious due to fiscal and policy uncertainties. Along with banks, toll road operators such as Evage and Vinci saw declines amid fears that highways could be renationalized if Macron’s party loses power, according to the agency.
Barclays Bank strategist, Emmanuel Cao, advised against rushing to buy low-lying stocks, pointing to the unusual political situation and the high major risks between now and the elections.
Despite these challenges, the CAC 40 index rebounded – according to Bloomberg data – by 0.5% today, Monday, exceeding the gains of the Stoxx Europe 600 index by 0.3%.
UK market warnings
Likewise, investors also remain cautious about the UK market. The July 4 elections are expected to bring major political changes since Britain’s exit from the European Union, and the new government will have limited fiscal flexibility and face scrutiny from bond watchdogs, the agency said.
The UK stock market has underperformed its US counterparts for years.
It can be said that while the United Kingdom has regained its position as the largest stock market in Europe, its markets, as well as France, face major challenges and uncertainties in the future.
