Paris stocks have picked themselves off the floor and are showing strong signs of upward momentum.
The Cac 40 benchmark went into a tailspin as the coronavirus hit the French and wider European economy but is now marching back towards its pre-crisis point.
This morning, the index was up 1.69% at 4,843.23. One month early, on 4 May, it traded at 4,378.23, but three months ago, in the last pre-crisis days, it had stood at 5,333.52 on 2 March.
An awkward place
In other words, the Cac 40 is more than 10% higher than a month ago, but is still more than 9% lower than in early March.
Encouragingly for those of a bullish disposition, the index is less than 400 points adrift of the 5,241.46 at which it stood a year ago, on 3 June 2019, when the coronavirus was a subject of interest only to medical specialists.
Trade France 40 - FR40 CFD
Paris occupies a sometimes-awkward place in the ranking of European financial centres, being neither a global powerhouse such as London nor a niche provider of specialist services, such as Zurich. It is probably closest to Frankfurt, but the latter’s weight is greatly magnified by the sheer size of the German economy.
Growth pick-up forecast for 2021
It was not always like this. In the 19th Century, Paris could claim to rival London in financial terms, with a booming stock market, as depicted in Emile Zola’s classic 1891 novel L’Argent, and strict adherence to bullion, both gold and silver, as the basis for monetary operations. Decline set in after the Second World War, as the French state took a guiding role in the economy, eclipsing the importance of equity-financed private enterprise.
By the Eighties, with London expanding greatly after its Big Bang reforms, the Paris bourse was looking hopelessly out of date, with its restricted membership and leisurely trading hours. Much has changed since then, and today the trader can deal in the stocks of some of the great names of French business. These include aircraft maker Airbus, car firms Peugeot and Renault and the Total oil group.
In its Article IV health check on the French economy, the International Monetary Fund (IMF) wrote: “Growth slowed last year as the cyclical recovery ran its course and temporary domestic factors, coupled with slowing global growth, weighed on demand. Nonetheless, activity remained resilient relative to peers, and the labour market continued to improve. The fiscal deficit declined modestly, but public debt reached an all-time high. The government’s structural reform agenda is being put in place and growth is expected to gradually return to its potential level over the medium run.”
Given this was in June last year, the coronavirus crisis will have overshadowed the outlook, but more recently the IMF has forecast growth of 4.5% next year, against 4% for the UK and 3% for Japan.