London’s stock market has surpassed Paris as fears mount over the upcoming French parliamentary elections. Currently, all stocks listed in France total approximately $3.13 trillion, slightly less than the $3.18 trillion value of shares listed in the United Kingdom. The CAC All-Share index in Paris remains marginally larger than London’s FTSE equivalent, but the UK-listed shares account for 98% of the market value.
The shift in Europe’s largest equity market is attributed to French President Emmanuel Macron's decision to call snap elections for June 9 following his party's defeat by the far right in the European Union lawmaker vote. Financial markets dislike uncertainty, and the recent political shift in France has raised concerns among investors.
Since June 9, the CAC 40 index in France has declined by over 5%, equivalent to $160 billion, as investors contemplate the potential influence of the far-right National Rally in the country's parliament. The upcoming French elections are scheduled for June 30 and July 7.
A recent opinion poll indicated that 32% of respondents plan to vote for the National Rally in the first round, while 25% support a left-wing coalition and 19% back Macron’s centrist party. French banking stocks have suffered notably since the election announcement, with shares in major banks like Société Générale, BNP Paribas, and Credit Agricole experiencing significant declines.
Investors are concerned that a parliament led by the National Rally could negatively impact banks, potentially leading to additional taxes and affecting the country's public debt, which is substantial. The uncertainty surrounding France's political landscape has also affected government bond prices, driving up yields.
Conversely, UK financial markets are relatively stable, with the upcoming general election on July 4 expected to favor the Labour Party. The resolution of Brexit uncertainties and the UK's economic recovery have attracted investors to British stocks, which are perceived as undervalued compared to US stocks.
While France faces challenges related to its debt and deficit, the UK is gaining favor among overseas investors due to its stable companies and attractive valuations. The National Rally in France has proposed economic changes that could impact the country's financial outlook, prompting credit rating agencies to monitor the situation closely.
Overall, concerns about France's debt and deficit persist, with experts predicting challenges in meeting fiscal targets in the coming years.
