The London Stock Exchange once again becomes the largest stock market in Europe

The UK’s main stock market reclaimed its crown as Europe’s most valuable for the first time in almost two years, data showed.

The total value of companies listed on the London Stock Exchange (LSE) reached $3.18 trillion on Monday, surpassing the total value of $3.13 trillion of companies listed in Paris, according to Bloomberg data.

Both estimates have since changed and remain close, but analysts describe it as a milestone.

They say the French market has fallen due to uncertainty surrounding its election, while the UK market is recovering after several years of underperformance.

The LSE had been the largest stock market in Europe for many years before November 2022 when it was exceeded.

Analysts at the time blamed the LSE’s performance on the fallout from former Prime Minister Liz Truss’ mini-budget, a weak pound, recession fears and Brexit.

The LSE had about $1.4 trillion more than its Parisian rival in 2016.

Analysts say market investors generally do not like uncertainty – and there are many questions about what the French snap election called by the president will mean.

President Emmanuel Macron called snap elections earlier this month, following a victory for his rival Marine Le Pen’s right-wing National Rally in European elections.

Hargreaves Lansdown’s head of money and markets, Susannah Streeter, however suggested that Le Pen’s manifesto contains “unfunded spending”.

“They’re not as focused on winning the market,” Ms. Streeter said.

Financial markets often react badly when they don’t know where the money for a government’s pledges will come from.

This is because it affects the value of bonds, which is money that investors lend to the government at a rate agreed by the market.

If investors believe that a government or potential government policies do not add up, the interest rate on bonds, known as the yield, tends to rise.

This then hurts the value of listed companies, because if bond yields are too high, then investors can often make more money by lending to the government than by investing in a company’s shares.

Looking to the UK, Ms Street added that the Labor party, which currently leads the polls ahead of the UK general election, has sought to reassure investors and the City that it is a “safe pair of hands”. .

The Conservative Party has also tried to convince investors of its approach.

Chancellor Jeremy Hunt told the Wall Street Journal’s chief executive council summit last month: “I think the fall in the London stock market is hugely overstated.”

“We have challenges and we are addressing those challenges.”

One of the biggest challenges facing the LSE over the past decade has been to attract investors and companies tempted by US exchanges.

A number of large firms, including those based in the UK, have chosen to list in the US rather than the UK.

This has boosted the value of US stocks, which then encourages even more companies to list there.

The S&P All-Share Index, which tracks the value of every US-listed company, is up more than 85% over the past five years.

The equivalent FTSE All-Share Index has risen by less than a tenth over the same time period.

However, since the start of this year, the UK index has risen, which AJ Bell investment director Russ Mold said was partly due to interest rate clarity.

They are expected to fall at some point this year, meaning British companies could borrow for less.

Despite this, British stocks are much cheaper than US stocks relative to their earnings, and Mold suggests that investors may be overvaluing US companies and undervaluing UK ones.

He noted that major US exchanges are heavily dependent on a handful of high-value tech stocks, including Google, Apple and Amazon, but he didn’t believe that would be sustainable in the long term.

“If everyone is sitting on one side of the boat, it will eventually capsize,” he said.