London Loses Crown of Biggest European Stock Market to Paris

(Bloomberg) --

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London has lost another status symbol. It’s no longer home to Europe’s biggest stock market.

That prize has been taken by France and its stable of luxury companies like LVMH SE and Gucci owner Kering SA, which are riding a wave of optimism that Chinese shoppers will be eager to spend as Covid restrictions ease.

It’s another symbolic sign of Britain’s shrinking place in the wake of Brexit, and the continental rivals that will step into position. The French stock market is now worth $2.823 trillion, narrowly edging out the UK at $2.821 trillion, according to data compiled by Bloomberg. In 2016, British stocks were collectively worth $1.5 trillion more than France.

Michael Saunders Says Brexit ‘Permanently Damaged’ UK Economy

“The UK economy as a whole has been permanently damaged by Brexit,” Michael Saunders, a former Bank of England policy maker, told Bloomberg TV on Monday. “The need for tax rises and spending cuts wouldn’t be there if Brexit hadn’t reduced the economy’s potential output so much.”

The UK’s stock market has long been out of favor because of its lackluster economy. But this year has been worse in the face of an energy crisis, double-digit inflation and the economic turmoil caused by former Prime Minister Liz Truss’s controversial tax cut plan.

While many of Britain’s blue-chips have been insulated from the UK turmoil by their global business presence, the smaller firms and consumer-oriented ones have been hit hard.

The FTSE 100 Index has fallen 0.4% this year versus a 17% plunge for the FTSE 250, which tracks mid-cap shares. Retailers have been hammered, with companies like Ocado Group Plc and JD Sports Fashion Plc plunging more than 40% in 2022.

There’s also a currency element to the market capitalization metric, since both markets are measured in US dollars. The pound weakened more than the euro this year, a 13% decline compared with 9.2% drop against the dollar, putting the UK market on a weaker footing comparatively.

While the shifts in stock market value have more to do with the UK’s fall rather than France’s rise, the moves point to the resilience of high-end luxury brands.

In particular, Louis Vuitton owner LVMH is holding up well against worries of a global recession. The company has reported record sales as wealthy Americans splurge on fashion. The $360 billion company is Europe’s biggest company largest by market value and the stock is down only 3.8% in 2022.

--With assistance from Michael Msika.

(Updates with quote in fourth paragraph.)

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