London loses as Europe’s largest stock market

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London has been stripped of its crown as Europe’s largest stock market after being leapfrogged by Paris as recession jitters hurt UK stocks.

The market value of stocks in Paris has edged ahead of those in London in dollar terms after wiping out a $1.4 trillion (£1.2 trillion) gap since the Brexit vote, calculations by Bloomberg revealed.

The pound’s plunge versus the dollar, recession worries hitting UK-focused stocks and the rebound of France’s heavyweight luxury shares, including LVMH, have caused the reversal.

London’s combined market capitalisation is at $2.821 trillion compared to $2.823 trillion for French stocks, according to Bloomberg.

It marks a huge reversal of fortunes in the last decade with UK stocks almost $2 trillion larger in dollar terms than their French rivals at one point in 2014 when the pound was much stronger.

London has gained a reputation as an “unloved” market in recent years as economic malaise and persistent political uncertainty has put off investors.

While the FTSE 100 looks set to end the year as one of the better global performers in a grim year for markets, the domestic-focused FTSE 250 is nursing an 18pc loss in sterling terms in 2022.

In addition, the value of British stocks in dollars has been hit by sterling sinking by more than 13pc against the greenback this year, hobbled by growing recession fears and the market backlash to “Trussonomics”.

By comparison, the euro has fallen 9pc versus the dollar.

Graham Secker, stocks strategist at Morgan Stanley, warned that UK stocks could suffer next year as the economic backdrop deteriorates significantly.

The Wall Street bank expects the UK to suffer a deeper downturn than any other European economy in 2023, followed by a lacklustre recovery in 2024.

“After its best relative performance in nearly 30 years, the macro backdrop looks poised to become less favourable for the FTSE 100 next year,” Mr Secker said. “On our economists’ forecasts the UK is likely to see the largest economic contraction of any major economy next year, as the cost of living crisis deepens and is augmented by tighter fiscal policy on top.”

Meanwhile, French stocks have rebounded in recent months, led by luxury goods giant LVMH, the highest valued company on the Paris stock market. The CAC 40 – the blue-chip index in Paris – is up 17pc since late September and is currently trading at a seven-month high.

The Telegraph

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