·Finance Reporter, Yahoo Finance UK
Mon, 14 November 2022 at 12:07 pm
London has lost its crown as Europe’s biggest stock market to Paris as economic growth concerns weigh on UK assets.
Paris has taken the top spot after the combined market capitalisation of its major share exchanges overtook those in the UK capital, according to an index compiled by Bloomberg.
Domestic-focused UK shares have slumped this year, while French luxury goods-makers like LVMH (MC.PA) and Gucci owner Kering (KER.PA) have recently been boosted by optimism over a potential easing of China’s zero COVID policy.
Investors rejected an announcement by the Liz Truss government in late September that it would slash taxes while ramping up borrowing in a bid to produce faster growth, citing concerns that the plan would push up inflation just as the Bank of England wants to bring it down.
Fears also crept in about the sustainability of government debt at a time of rapidly rising interest rates.
The pound crashed to a record low against the US dollar, while bond prices slumped, sending yields soaring. That pushed mortgage rates higher, and brought some pensions funds close to default.
The mini-budget which eventually paved the way for Truss’ downfall may have cost the country’s economy £30bn, according to the Resolution Foundation think tank.
Bloomberg added that the market cap gap between the UK and French stock markets has been narrowing from about $1.5tn since the Brexit vote in 2016.
UK equities are now worth about $2.821tn compared with about $2.823tn for French equities, by Bloomberg’s calculations.