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Last week France gave the papers plenty to write about, although a disproportionate percentage of coverage was focused on non-economic issues. Looking at the CAC 40’s movements over the last four months would lead you to believe that traders have been more interested in non-economic issues, too.
To some extent that is correct – primary exchanges for many countries bear little resemblance to their economies. The reason for this is that many firms now see sizable percentages of their income derived from other countries as they expand and become increasingly multinational. The issues facing France today are similar to those facing the UK back in the 1980’s; unions are able to exert too much pressure, and are weakening the competitiveness of France as a destination to base a business.
All of these issues continue to be discounted, however, as the flow of cash into equities has ensured demand at the cost of reason.