European investment trusts November equities rally as inflation falls to 2.4% (LON:FEV)

Fidelity European Trust PLC (LON:FEV) monthly factsheet for the period ended 30 October 2023.

Portfolio Manager Commentary

After falling for three consecutive months, Continental European equities rallied in November as cooling inflation boosted hopes that central banks will adopt a more dovish tone. Eurozone inflation eased to 2.4% in November, from October’s reading of 2.9%. Lower energy prices were the major contributor to the fall; and both goods and services inflation also eased, putting the 2% target in sight as investors speculate that the European Central Bank (ECB) will cut interest rates sooner than previously suggested. ECB President Christine Lagarde signalled that the bank will continue to focus on bringing inflation back to its long-term target of 2% and will not act upon short-term developments.

During the month, the Trust outperformed the index, driven by strong stock picking in financials and the large overweight in technology. The Trust’s use of gearing supported relative returns in a strongly rising market. Gains were somewhat limited by weaker stock picking in industrials and consumer discretionary. At a stock level, financials holdings Partners Group, 3i Group and EQT, were the top contributors to relative gains. Conversely, the short position in an industrial business detracted from performance.

Our focus is on finding attractively valued companies with good prospects for cash generation and dividend growth over the longer term. On a rolling 12-month basis, the Trust recorded NAV and share price returns of 10.7% and 9.0% respectively, compared to 10.3% for the index.

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