LIVE MARKETS-France: Record highs but concerns linger
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FRANCE: RECORD HIGHS BUT CONCERNS LINGER
France's CAC 40 .FCHI might have hit a new record last week, but Capital Economics believes the underperformance of French stocks compared to European peers will likely continue for the foreseeable.
The country's blue-chip index is up about 11% this year, a decent performance but still underperforming Germany (+22%), the Netherlands (+12%), Britain (+18%), Spain (+37%) and Italy (+24%).
Looking under the hood, Capital Economics believes that part of the reason for the underperformance stems from the financials sector.
This might sound strange with Soc Gen SOGN.PA shares almost doubling this year and BNP Paribas BNPP.PA and Credit Agricole CAGR.PA rising 15.6% and 22.9%, respectively.
But, CapEco notes, they have still significantly underperformed counterparts in the euro zone, particularly Spain and Italy where the weight of financials is very high.
"The ongoing underperformance of the financials sector in MSCI’s France Index vis-à-vis the same sector in its Spain Index, for example, seems to be tied to developments in their respective sovereign bond markets amid contrasting prospects for public finances and growth," writes John Higgins, chief markets economist at Capital Economics.
Other important sectors in France include industrials and consumer discretionary, the latter due to the index's heavy weighting of luxury stocks, which are sensitive to the Chinese and U.S. economies.
"While we think the outlook for economic growth is bright in the U.S., we are less upbeat about the prospects for economic growth in China," Higgins writes.
(Samuel Indyk)
Earlier Live Markets posts:
NIKKEI/TOPIX DIVERGENCE A REASON TO WORRY, SOCGEN SAYS CLICK HERE
GOLD: THE "MOUNT EVEREST" OF BULL MARKET CLICK HERE
LITTLE DRAMA CLICK HERE
EUROPE BEFORE THE BELL: MILESTONES MILESTONES EVERYWHERE CLICK HERE
MORNING BID: TRADE DEAL HOPE SPURS RISK RALLY CLICK HERE
French stocks hit record but still underperform peers 
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