April 16, 2024

News and Political Commentary

why European stock markets are in crisis

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Europe’s equity markets are at a record high but beneath the surface they are in crisis. Trading volumes are sinking, initial public offerings are scarce and some of its biggest companies prefer the appeal of the US.

The lacklustre activity has jolted the region’s policymakers into action. They are trying to revive their faltering markets with incentives designed to boost investment in domestic companies and encourage businesses to list at home.

Yet those ambitions are littered with political, financial and cultural obstacles that for years have proven overwhelming. Meanwhile the US market grows ever larger.

“Capital markets is on the political agenda in pretty much every finance ministry across Europe,” said William Wright, founder of markets think-tank New Financial. “It’s a hugely challenging political, cultural problem.”


1. What’s the problem in Europe and why does it matter?

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Before the financial crisis the performance of the main US and European stock markets closely followed each other, even if Europe lagged behind Wall Street.

But since 2008 the gap has widened markedly. Driven by the growth of Silicon Valley’s technology giants, the US market’s relentless rise has sucked in more money from asset managers and pension funds around the world, creating a virtuous cycle.


2. What’s missing? Silicon Valley rocket fuel

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European markets’ lack of vigour has multiple causes. The region’s economic performance since the 2008 financial crisis has been far more sluggish than that of the US.

Europe also lacks the fast-growing tech companies that have powered the meteoric…



2024-03-03 00:00:33

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