Speaker 1: It's hard and Singapore it's like twenty eight degrees. And
Speaker 1: I could not be more happy to be here at
Speaker 1: the Bloomberg New Economy Forum, except so you're the organizer
Speaker 1: of the New Economy farm. Oh la la. But they're
Speaker 1: doing Paris on the podcast without me, Cat, So I
Speaker 1: am so happy to be here. But Paris without me, Cat,
Speaker 1: Let's Paris without You're going to be like Dave Merritt
Speaker 1: domes up. I'm so sorry, Francying, but it is true.
Speaker 1: We are focusing this week without you on Paris, the
Speaker 1: city of Lights and now home to Europe's biggest stock market.
Speaker 1: That's according to Bloomberg data, which now shows that it
Speaker 1: is outgrown London and is now holding the crown of
Speaker 1: the biggest European stock exchange. And we're going to dive
Speaker 1: into that with Bloomberg experts both on this side and
Speaker 1: that side of the channel, and asking the question, is
Speaker 1: this just another sign of Britain's shrinking place in the
Speaker 1: world in the wake of Brexit. In fact, on Bloomberg Television,
Speaker 1: former banking and policymaker Michael Saunders didn't hold back when
Speaker 1: assessing the impact of Britain's exit from the EU, the
Speaker 1: UK economy. There's a whole that's been permanently damaged by Brexit.
Speaker 1: This reduced the economy's potential output, significantly, eroded business investment.
Speaker 1: I would look, if we hadn't had breaks it, we
Speaker 1: probably wouldn't be talking about some austerity budget this week.
Speaker 1: The need for tax rises spending cuts wouldn't be there
Speaker 1: if breaks it hadn't reduced the economy's potential output so much.
Speaker 1: I'm David Merritt and this is in the City Bloomberg's podcast,
Speaker 1: connecting me to the stories and the voices at the
Speaker 1: heart of the City of London, and this week we
Speaker 1: are going to focus on one of London's most illustrious
Speaker 1: and long term rivals, Paris, the City of Light, and
Speaker 1: it's taking this opportunity to shine and we're going to
Speaker 1: hit the metaphoric rad I wanted to take the Eurostar,
Speaker 1: but I think the most official way to do this
Speaker 1: is down the line by speaking to some key Bloombo
Speaker 1: voices in our beautiful Paris bureau in the heart of
Speaker 1: the city on the roof screeb. But first, the author
Speaker 1: of this week's Bombshells story on London losing its crown.
Speaker 1: We have Joe Eastern from our Equitives team right here
Speaker 1: in the London studio. Joe, thank you so much for
Speaker 1: joining us on in the city. I really just wanted
Speaker 1: to dive into this amazing story that you were first
Speaker 1: with this week. It's called quite a stir been picked
Speaker 1: up all over the place. The headline is that London
Speaker 1: has lost its crown of the biggest European stock market
Speaker 1: to Paris. I know you've been tracking this data for
Speaker 1: some time. Can you explain what's been happening in recent weeks?
Speaker 1: So so we're tracking this data for several months really
Speaker 1: because we noticed that the market caps were finally getting close.
Speaker 1: The data goes back to round two thousand and three,
Speaker 1: so we know that it's it's been a big gap
Speaker 1: for a couple of decades. At one point it was
Speaker 1: around at one point five trillion dollar gap and now
Speaker 1: it has turned negative and that's that's amazing number, just
Speaker 1: to put that into context. So one and a half
Speaker 1: trillion dollars the London market was worth more than Paris
Speaker 1: back in twenties six, so before the Brexit vote, and
Speaker 1: now they're both around the two point eight trillion marks.
Speaker 1: So there's been this enormous convergence and now those lines
Speaker 1: of crossed. What has driven that mainly we had an
Speaker 1: underformance in UK domestic stock So these are companies that
Speaker 1: are heavily exposed to the UK economy. So it's not
Speaker 1: really the foots one hundred that's done reasonably well, and
Speaker 1: it's really global companies. It's the mining firms and the
Speaker 1: you know, the energy companies that have got a global footprint. Yeah, exactly,
Speaker 1: so around their sales come from outside of the UK.
Speaker 1: So dollar strength is seen as very good to the
Speaker 1: indexes out formed, but the foot see two fifty of
Speaker 1: midcaps has plunged. Companies that exposed to the UK domestic
Speaker 1: economy have lost around half their value, a lot of them,
Speaker 1: so big retailers, Marks and Spencers, home builders are down
Speaker 1: fifty for the year because of the worries about the
Speaker 1: economy and that's been one of the drivers for this change.
Speaker 1: So that is a pretty bleak story then, isn't it.
Speaker 1: I mean will say, if you split apart the London
Speaker 1: Stock Exchange, the companies that are really just looking at
Speaker 1: Britain or most of their profits from Britain, they've had
Speaker 1: a terrible year and that has dragged down the overall
Speaker 1: value of the London market. It's just smaller than France exactly.
Speaker 1: It's been virtually all domestic stocks related. Obviously. I think
Speaker 1: the main thing among economists is about how the UK
Speaker 1: consumer will be hit harder by inflation than other countries,
Speaker 1: mainly because of the way energy bills are priced and
Speaker 1: the way mortgage rates are priced as well in terms
Speaker 1: of flexible mortgage rates, and so the UK domestic economy
Speaker 1: is expected to contract more than other nations and that
Speaker 1: is reflected in the domestic stock market. Can I ask
Speaker 1: about the currency effect? Obviously, you know we all saw
Speaker 1: the huge plunge in the pound after the trust quoteng budget.
Speaker 1: We've seen a bit of a rally in sterling since then,
Speaker 1: um and a feeling that you know, the worst might
Speaker 1: be over. Perhaps the currency we've been talking perhaps about
Speaker 1: parity between the dollar and the power that seems to
Speaker 1: have retreated a little bit. But how much of this
Speaker 1: reverse sort of fortunes to London Paris is due to
Speaker 1: weakness installing? A large amount of it is because we
Speaker 1: are talking about dollar values. The euro is down around
Speaker 1: eleven for the year. The pound I think was down
Speaker 1: around about fifteen cent last time I checked, So there
Speaker 1: is definitely a currency impact. And really the Bank of England,
Speaker 1: although they have become relatively more hawkish than the last
Speaker 1: well you know, probably a couple of months ago, they
Speaker 1: turned more hawkish and they were definitely more you know,
Speaker 1: to use a market to more dubbish than other central banks,
Speaker 1: and that led to an underformance of the UK currency
Speaker 1: and that's reflected in this data. And then obviously that
Speaker 1: feeds through to UK companies that buy products input costs
Speaker 1: in pounds there there they're hurt when the when the
Speaker 1: currency goes down. But obviously on Thursday, where many listeners
Speaker 1: will be tuning in, we're going to have the big
Speaker 1: autumn statement, the next kind of fiscal plans from Chancellor
Speaker 1: Jeremy Hunt. We know broadly what he's going to do
Speaker 1: right now. He's going to have to cut public spending,
Speaker 1: he's going to raise taxes um So in that context,
Speaker 1: the next year looks even bleaker, doesn't it for the
Speaker 1: UK economy In there for all these companies that you're
Speaker 1: talking about, you know, the retailers, the home builders, there's
Speaker 1: no light at the end of the tunnel. It's there
Speaker 1: for these stocks I don't think there is like at
Speaker 1: the end of the tunnel for these companies. Yeah, I
Speaker 1: think that probably what will happen is that inflation sort
Speaker 1: of tops out, maybe towards the middle of next year,
Speaker 1: and then interest rate expectations will probably be already coming
Speaker 1: down by then, and then you see a repricing of
Speaker 1: certain assets, and I think that could benefit the UK consumer.
Speaker 1: But I mean, in terms of what Hunt can do,
Speaker 1: I think his hands are pretty much tied. So obviously
Speaker 1: a lot of pick up here in London on this story,
Speaker 1: but in France as well, what I mean, how much
Speaker 1: how much interest in this story is there in Paris?
Speaker 1: Are they crowing about this victory over longly? Yes? So
Speaker 1: kind of Yeah. I mean I had a few reporters
Speaker 1: from different French agencies contact me actually and yeah, trying
Speaker 1: to clarify some of the facts that they could then
Speaker 1: report the story themselves. So that was great to see
Speaker 1: them picking it up. They were a lot happier than
Speaker 1: the British, and I have to say so I had
Speaker 1: a few um fund managers didn't weren't so keen on
Speaker 1: the story. But you know, it is based on data obviously,
Speaker 1: so it is factually undernoidable data. You know, there are
Speaker 1: caveats to in terms of how a lot more money
Speaker 1: actually changes hands on the UK stock market even today.
Speaker 1: So the value traded per day on the London market
Speaker 1: is bigger than Paris still, but the value of companies
Speaker 1: listed um in those exchanges is now bigger in Paris
Speaker 1: for the first time. So have you been going on
Speaker 1: French TV to explain this or French is not as
Speaker 1: good as my Spanish? Yeah? Maybe a few words back
Speaker 1: from GCSE say days I can use so any optimism
Speaker 1: for for for this reversing any time soon. I mean,
Speaker 1: the big batdrop here isn't it is? It's the B word,
Speaker 1: it's Brexit. Longer term? Can this be reversed without a
Speaker 1: fundamental shift in relationship between Britain and the opinionion? I
Speaker 1: think that not as we stand. I think that maybe
Speaker 1: some of those barriers between the UK and Europe naturally
Speaker 1: break down over the years and then we you know,
Speaker 1: we moved towards a sort of you know, brexit um
Speaker 1: only in name situation. But you know that's probably a
Speaker 1: bit beyond my my scope. But I do think that,
Speaker 1: you know, there are positive drivers in the UK, the
Speaker 1: UK business does generally do well. Financial services are still strong.
Speaker 1: London is still a strong global financial center. But then
Speaker 1: you know, being a UK stocks reporter probably do have
Speaker 1: a small bit of bias, but I think there are
Speaker 1: there are reasons to be cheerful in London still, Jay,
Speaker 1: thank you so much. Clearly gives the very strong indications
Speaker 1: about the job achieved over the last five years in
Speaker 1: the attractiveness of a place like Paris and France of all,
Speaker 1: as well as clear consequences of the Brexit. As you
Speaker 1: mentioned it, the weaker the weaker pounds has been playing
Speaker 1: his role, but you have also recognized that key strategy
Speaker 1: choice of international group favoring being public outside of UK
Speaker 1: as playing a role. That was Pascal Cany, president of
Speaker 1: Business France, the government agency charged with promoting France to
Speaker 1: foreign investors. He was joining us on Bloomberg Radio this
Speaker 1: week to talk about the very story, and just like
Speaker 1: Michael Saunders, he says Brexit is a big reason for
Speaker 1: the shift out of London, but he's also saying it's
Speaker 1: a strategic choice made by businesses beyond just Brexit. Now,
Speaker 1: as promised for more on what is driving those strategic choices.
Speaker 1: I thought the best person to speak to would be
Speaker 1: Albertina Tolsolei. She's a Bloomberg proporster in Paris. She's covered
Speaker 1: French companies and markets for ten years, so I thought
Speaker 1: i'd give her a call. Hello, Hello, Burge, I can
Speaker 1: hear you loud and clear. How are you, Albertina? Oh? Good? Yeah,
Speaker 1: I mean how things in Paris and everything is busy
Speaker 1: and fine and well from looks of it, things are
Speaker 1: going well for Paris. Well, that's my point, not just
Speaker 1: going well in Paris, right, things are going gang busses
Speaker 1: in Paris. Isn't that What's what's what it looks like
Speaker 1: from over here? I think that, Yeah, I think it's
Speaker 1: what it looks like from over there. I wouldn't you know.
Speaker 1: I think that things are going well. I think that
Speaker 1: compared to the UK, things are going great. Yeah, I
Speaker 1: mean I'm not I'm not saying it's a you sound
Speaker 1: like a bit of relish in your voice. There sadness.
Speaker 1: I think you know it's Europe is weaker when the
Speaker 1: UK doesn't do well. And I'm not French. A lot
Speaker 1: of my French husband's relishing the moment. All right, Okay,
Speaker 1: there we go. That's the difference, not me, but you
Speaker 1: know this story this week that Joe Eastern, right, it's
Speaker 1: caused a bit of a splash here and he's he
Speaker 1: says that French media have been on his case to
Speaker 1: talk about as well. You know, and you've seen the
Speaker 1: headline right, London has lost its crown, the biggest European
Speaker 1: stock pocket to Paris. I know you have French stocks
Speaker 1: for years. Were you surprised by this? Not really, I
Speaker 1: would say, um, it's it's been a long time in
Speaker 1: the making. You know, it's not only the problems that
Speaker 1: the UK faced us with Brexit. Part of it is
Speaker 1: that I think that there's a second dimension here. I
Speaker 1: covered very closely French in actions a few months back,
Speaker 1: and I have to say that the you know, UM voting,
Speaker 1: the staying in office, the second you know, um five
Speaker 1: years another five years of president Emmanuel Macon also has
Speaker 1: helped give confidence as opposed to the chaos that we've
Speaker 1: seen here multiple administrations exactly. So there's a certain form
Speaker 1: of stability. And don't forget that mccon is a former
Speaker 1: investment banker. Investors like him. He's trying to you know,
Speaker 1: open up France, um, to make it a safer place
Speaker 1: to invest. It was not a safe place for investments
Speaker 1: because of the you know, the high taxes, even the
Speaker 1: taxes on your salaries. There are still taxes, but he's
Speaker 1: really trying to tackle all of those issues, not to
Speaker 1: mention structural reforms that could still come. So UM, it's
Speaker 1: not only the UK that has been doing worse. I
Speaker 1: think that, you know, if we had seen Marine le
Speaker 1: Pen succeed in her presidency attempt to take the presidency,
Speaker 1: possibly the picture would have been a bit different. But yes,
Speaker 1: a lot of optimism in France today, in particular UM
Speaker 1: from outside UM investors and looking looking to France. I
Speaker 1: just want to talk a little bit, obviously about some
Speaker 1: more of the reasons why the French market is doing
Speaker 1: me abrun again. You've covered this market in debt and
Speaker 1: the companies. It seems like it's again. The good news
Speaker 1: side of this story is that some of these French
Speaker 1: companies are doing creditally well. I'm not thinking about the
Speaker 1: high end luxury brands for instance. Can you talk a
Speaker 1: little bit about some of those success stories. You know,
Speaker 1: the CACA index is the benchmark index in France, and
Speaker 1: the powerhouses today are not the same powerhouses that we
Speaker 1: had ten years ago or even five years ago. Lvmash,
Speaker 1: the owner of VT, is the you know, one of
Speaker 1: the biggest Europe's biggest companies by market value. If Mess
Speaker 1: has become a powerhouse as well. Um Care Ring lost
Speaker 1: a bit, but it's still high up there. Loreal, the
Speaker 1: maker of beauty products, is high up there. These companies
Speaker 1: keep on doing well. So it's absolutely fascinating to see
Speaker 1: how you know, inflation is hitting everyone. Those rich people
Speaker 1: who buy her mess bag, uh, you know, her miss
Speaker 1: bag broken back and cost more than ten thousand euros.
Speaker 1: Those people aren't that dented in their purchasing power. And
Speaker 1: there's another element. Obviously, it's China. We all know that China.
Speaker 1: You know that the persistent no zero covid umh policy
Speaker 1: has hurt many businesses and with factories also closed. But
Speaker 1: you know, these companies have developed very powerful e commerce
Speaker 1: societies are selling still today even in China. And obviously
Speaker 1: the minute that China comes back, it will mean a
Speaker 1: lot of designer clothes, a lot of handbags, a lot
Speaker 1: of jewelry. Let's not forget the jewelry. For Rishmont, the
Speaker 1: owner of Cartier not French, but in you know, these
Speaker 1: are even even Richmill has some French brands. I mean, yes,
Speaker 1: LVMH particularly as you mentioned there, it's now worth about
Speaker 1: three hundred and sixty or so billion dollars. It's your's
Speaker 1: biggest company by market value, right, yeah, and and only
Speaker 1: down a little bit this year in the context of
Speaker 1: huge economic headwinds. You would have thought in the past
Speaker 1: luxury goods makers would have been really hammered in this environment, right,
Speaker 1: But as you say, it's like the new global elite
Speaker 1: and not being touched by this slowdown, and in fact,
Speaker 1: it sounds like there's just more growth to come for
Speaker 1: these companies. Yes, they were hammered a bit in particular
Speaker 1: mess at the start of the year, but not so
Speaker 1: much for their sales, which really didn't change much. And
Speaker 1: the outlook remains great. But because of the higher interest rates,
Speaker 1: and obviously you know, higher interest rates tend to hurt
Speaker 1: in terms of investments, both the tech companies and the
Speaker 1: luxury companies. But as you've seen, the tech companies are
Speaker 1: having a rough patch, even the big American companies and
Speaker 1: and not luxuries. So parents is really sitting on in
Speaker 1: the sweet spot here, isn't it, you know? So as
Speaker 1: the home of luxury brands and these huge companies. It's
Speaker 1: managing to to sort of ride the wave on this.
Speaker 1: What does this mean for the city. I think this
Speaker 1: is just the start because when Brexit happened, you know,
Speaker 1: when the impact of Brexit started being felt and it
Speaker 1: actually came alive. You know, Um, we were in the
Speaker 1: middle of a pandemic, so a lot of those job
Speaker 1: moves didn't immediately happen just because it was the middle
Speaker 1: of a pandemic, so there was a lot of work
Speaker 1: from home. But the change in the past, I would
Speaker 1: say ever since September, you know, we we are seeing
Speaker 1: a massive return return to work and people have actually
Speaker 1: started moving. Even City Group I think announced that it's
Speaker 1: opening uh you know, new jobs in Paris, new offices,
Speaker 1: so a lot of office space that it's being taken up.
Speaker 1: Of course, this also means um support for real estate,
Speaker 1: quest for school places in international schools. Uh it again,
Speaker 1: it spells very good news for for you know, restaurants
Speaker 1: or for luxury again hotels. I mean Paris is really
Speaker 1: back and and definitely you know this can be felt.
Speaker 1: So is it hard to get a table at a restaurant?
Speaker 1: Is very hard? It's getting harder and harder to get
Speaker 1: tables at a restaurant. And this is very strange because
Speaker 1: you know, there are there are a lot of worries
Speaker 1: for the higher inflation, but for example, restaurants haven't been
Speaker 1: impacted at all. But once again, um, I think that
Speaker 1: this is just the start of a movement. You say,
Speaker 1: you know many jobs trickled from London to Paris. I'm
Speaker 1: not sure that a lot of people just moved out
Speaker 1: of of of London. But all those new hires, all
Speaker 1: the news, new new places you want to fill in jobs,
Speaker 1: all the new jobs are coming, you know, to to
Speaker 1: continental Europe, and Paris is really a winner. Again, not
Speaker 1: everything is perfect, but I think that there's a lot
Speaker 1: of positiveness. Um that maybe right now people outside of
Speaker 1: France see more and the French themselves actually as usual,
Speaker 1: but that is pretty normal. I think. I think that
Speaker 1: you know, we're gonna be we're gonna be tracking this theme.
Speaker 1: Our's in a very closely and I think for the
Speaker 1: next installment, I think we're going to have to come
Speaker 1: on location. So if you can secure one of those
Speaker 1: restaurant bookings, we're going to do some on the ground reporting.
Speaker 1: Albertina Torso from Paris. Thank you so much for joining us,
Speaker 1: Thanks for listening to this week's in the City. We
Speaker 1: will be back next week, but in the meantime, if
Speaker 1: you like our show, please head on over to Apple
Speaker 1: Podcasts or wherever you listen to podcasts and rate, review
Speaker 1: and subscribe. This episode was hosted by me David Merritt,
Speaker 1: and it was produced by Summer Sadi, Editing and sound
Speaker 1: design by Blake Maple's. And don't forget to check out
Speaker 1: bloomberg dot com slash uk Wealth for more insights on
Speaker 1: how to manage your money on news site has launched
Speaker 1: this week.