Primary equities markets

Deutsche Börse and Euronext

Europe's stock exchanges are notably fragmented, but thanks to a spreading interest in stocks and the arrival of the euro, competition has increased between markets. Attempts to forge links among exchanges have mostly failed despite the increasing pressure to consolidate. While the United States has only three national and five regional exchanges, Western Europe has more than 30 stock exchanges. Most will probably not survive the next ten years; some will be taken over and others may simply shut down. Although it might make sense for stock exchanges to join forces, many fiercely defend their turf, preferring to carry on independently. Merging exchanges allows liquidity to be pooled and offers the means for more efficient clearing and settlement.

 

One or two are likely to emerge as dominant. The three biggest have reorganized to meet the challenge. The London Stock Exchange (LSE) and Deutsche Börse and Euronext (the merger of the Paris, Amsterdam and Brussels bourses) have shed their mutual structure and are now listed companies. Cross border equity portfolio flows in the world's developed markets are estimated to have quintupled in the past five years with European flows growing by an even a greater margin. The launch of the euro has set in train a huge reshuffling of portfolios. Institutional investors in Europe now tend to judge sectors almost entirely from a pan-European not a national perspective.

 

Primary equity indexes

Frankfurt DAX

The German Stock Index is a total return index of 30 selected German blue chip stocks traded on the Frankfurt Stock Exchange. The DAX has a base value of 1,000 as of December 31, 1987. As of June 18, 1999 only XETRA equity prices are used to calculate all DAX indices.

 

Paris CAC

The CAC-40 Index, the leading French stock market index, is a narrowly based capitalization weighted index of 40 companies listed on the Paris Bourse. The index was developed with a base level of 1,000 as of December 31, 1987.

 

 

The CAC was up 18.0 percent in 2013 while the DAX soared 25.5 percent. For the year 2014, the CAC was down 0.5 percent while the DAX added 2.7 percent.

 

So far in 2015, equities rallied in the first quarter. The CAC added 7.8 percent in January, 7.5 percent in February and 1.7 percent in March. The DAX advanced 9.1 percent, 6.6 percent and 5.0 percent. In the second quarter, the CAC added 0.3 percent in April but declined 0.8 percent in May. The DAX however, retreated in both April (4.3 percent) and May (0.4 percent). In June the CAC lost 4.3 percent and the DAX, 4.1 percent.