Paris stocks sinking in a sea of troubles

France’s Cac 40 blue-chip stock index ticked up this morning, by 4.46% to 4,431.96, almost certainly buoyed by the $2 trillion fiscal package agreed in Washington.

It was a rare piece of good cheer for those trading and investing on the Paris Bourse. One month ago, on 25 February, the index stood at 5,679.6802, and on 27 December it traded at 6,037.3901.

That means that, in three months, the Cac 40 has lost more than 26% of its value. You would need to go back a year, to 25 March 2019, to find a less unflattering comparison – back then, the index traded at 5,260.6401.

“Build on reforms”

The index contains some of the best-known names in European business and industry. From financial services there are BNP Paribas and insurer Axa, from engineering there are plane-maker Airbus and car group Renault, while energy is represented by Total.

Trade Total - FP CFD

From an eminence in the 19th Century that rivalled that of London, the Bourse’s relative importance as a financial services hub declined in the middle years of the last century. While London and New York innovated, with new products such as Eurobonds and futures indices, Paris sometimes appeared relatively sleepy.

All bar three of its broking firms had been given their seats on the exchange at the time of Napoleon, and the remaining three at the time of President de Gaulle. Trading hours were very limited, reflecting the fact that equity dealing was accorded a low economic importance in a country where the state played a leading role in the economy.

But reforms since the Nineties have helped restore the importance of the Paris exchange.

In an Article IV health check, conducted ahead of the coronavirus outbreak, the International Monetary Fund (IMF) noted France’s success with some of its reform agenda, including employee training and changes to foster a more business-friendly environment. It added: “Looking forward [we] recommended pursuing and building on the authorities’ reform agenda to address France’s remaining structural challenges: high public and private debt, still high structural unemployment, sluggish productivity growth, and inequality of opportunity.”

Protests met by tax cuts

Although a major economy – one of only three Group of Seven members in the European Union, along with Italy and Germany – and with a generally very productive private sector, France is vulnerable in a number of ways. Its public finances have been in deficit since 1974, and previous attempts to rein in spending and reform the labour market have met with resistance, sometimes of a violent nature.

President Emanuel Macron was pledged to ride out such storms, in contrast to predecessors such as Jacques Chirac and Nicolas Sarkozy, but the “gilets jaunes” (yellow vests) protests, initially against higher fuel prices but later more widely against alleged economic injustice, have continued this tradition.

Mr Macron responded in April 2019 to the protests with €5 billion of tax cuts for low and middle income people and pension increases.