French stocks were higher this morning after strong endorsement from strategists at Deutsche Bank.
The showed the Paris exchange up 0.9% at 5,028.16.
This is a much-needed boost for the index after what has been a difficult 12 months.
Great names of French business
Reuters reported that Deutsche Bank upgraded its rating, suggesting investors buy more French shares than would be needed merely to mirror their presence in benchmark indices.
A note from the bank read: “We upgrade French equities from underweight to overweight following the recent under-performance, as our projection of improving euro-area PMIs [purchasing managers indices] implies 4% outperformance over the coming months.”
The PMIs survey opinion among purchasing managers and these surveys are seen as giving a good indication of whether a sector or an economy is likely to expand or contract. Deutsche’s strategists believe improved European growth will be of benefit to French businesses.
But it has been under pressure in recent months. While currently higher than it stood a month ago, on 29 October – 4989.3501 – it is well down on the 5501.3301 seen three months ago, on 29 August.
The picture over the last 12 months also shows a decline, from 5398.0498 on 29 November last year. Until October this year, the Cac 40 seemed to find support at about 5,000 and met resistance over 5,600.
But since the second half of October, it has routinely traded below 5,000 and never above 5,200.
Over a five-year period, the index has traded at a low of 3,995.0601 on 12 February 2016 and a high of 5614.5908 on 18 May this year. Optimists may draw comfort from the fact that the five-year peak was this year rather than earlier, suggesting some underlying upward momentum.
Seeking past glories
Undoubtedly, political worries in France will have played a part in putting a lid on share prices. High hopes of sweeping pro-business reforms from President Emmanuel Macron, elected last year, have faded as his programme has been bogged down by the familiar wave of protests, most recently against higher fuel prices.
Once one of the great stock markets of Europe, as featured in novels such as Money by Emile Zola, published in 1891, the French exchange has been overshadowed by London in recent decades.
Furthermore, the French attitude to shareholders and their rights has not, traditionally, been conducive to a lively equity market. Traditionally, shareholders have been viewed as little more than punters, having a “flutter” on company stocks, not company owners.
This has changed somewhat, and may do so increasingly as France tries to take financial business away from post-Brexit London, perhaps hoping for a restoration of some of the market’s former glory.