The UK’s main stock market retook its crown as Europe’s most valuable for the first time in nearly two years, data shows.

The total value of companies listed on the London Stock Exchange (LSE) hit $3.18 trillion on Monday, overtaking the $3.13tn total value of companies listed in Paris, according to Bloomberg data.

Both valuations have shifted since and remain close, but analysts describe it as a milestone.

They say the French market has slumped because of the uncertainty around its election, while the UK market is recovering after several years of underperformance.

The LSE had been Europe’s largest stock market for many years before November 2022 when it was overtaken.

Analysts at the time blamed the LSE’s performance on the fallout from former Prime Minister Liz Truss’s mini-Budget, a weak pound, recession fears and Brexit.

The LSE was worth about $1.4tn more than its Parisian rival in 2016.

Analysts say that market investors generally dislike uncertainty – and there are many questions about what France’s upcoming election will mean.

President Emmanuel Macron called the snap election earlier this month, following a victory for his rival Marine Le Pen’s right-wing National Rally in European elections.

Hargreaves Lansdown’s money and markets head Susannah Streeter suggested that National Rally’s manifesto contains “unfunded spending”.

“They are not so focused about winning over the market,” said Ms Streeter.

Financial markets often react badly when they do not know where the money for a government’s pledges will come from.

This is because it affects the value of bonds, which is money investors loan the government at a rate agreed by the market.

If investors believe that a government or potential government’s policies don’t add up, the interest rate on bonds, known as the yield, tends to rise.

This then hurts the value of listed companies, because if the bond yield is very high then investors can often make more money lending to the government than investing in a company’s shares.

Looking at the UK, Ms Streeter said that the Labour Party, which is currently leading in the polls in the run-up to the general election, has been trying to reassure investors and the City that it is a “safe pair of hands”.

The Conservative Party has also been trying to convince investors of its approach.

Chancellor Jeremy Hunt told the Wall Street Journal chief executives’ council summit last month: “I think London’s stock market demise is massively overstated.

“We do have challenges, and we’re addressing those challenges.”

One of the biggest challenges facing the LSE over the last decade has been pitching to investors and companies tempted by American exchanges.

A number of big firms, including ones based in the UK, have chosen to list in the US rather than the UK.

This has driven up the value of American stocks, which then encourages even more companies to list there.

The S&P All-Share index, which tracks the value of every listed company in the US, has soared over 85% over the last five years.

The equivalent FTSE All-Share index has increased by less than a tenth over the same time period.

However, since the start of this year, the UK index has picked up, which AJ Bell’s investment director Russ Mould said was partly due to clarity on interest rates.

They are expected to go down at some point this year, meaning British companies can borrow money for less.

Despite this, British stocks are much cheaper than American stocks relative to their earnings, and Mr Mould suggested investors may be overvaluing US companies and undervaluing UK ones.

He noted that the main US exchanges are heavily dependent on a handful of highly valued tech stocks, including Google, Apple, and Amazon, but did not believe this would be sustainable in the long term.

“If everyone is sitting on one side of the boat, it’s going to tip over eventually,” he said.