Fidelity European Trust PLC (LON:FEV) monthly factsheet for May 2024.
Portfolio Manager Commentary
Continental European equities delivered strong returns in May. Markets were supported by a strong earnings season and optimism around interest rate cuts, although rising bond yields kept sentiment in check. Inflation data for the eurozone remained relatively stable, with a slight increase observed in May. Investors became increasingly confident that the European Central Bank (ECB) would deliver its first interest rate cut of the cycle at its meeting in early June. The ECB has signalled that the pace of rate cuts will be data dependent, to eliminate the risk of premature easing.
During the month, the Trust underperformed the index. Stock selection across most sectors, notably consumer discretionary, financials and industrials detracted from relative returns. Gearing was a further drag. Luxury conglomerate LVMH was the biggest stock specific disappointment, as the luxury sector came under pressure after Hermès and Burberry warned of a challenging outlook for the year. Oil & gas major Total Energies declined in line with the energy sector. The position in electrical goods distributor Rexel added marginal relative value, as the company has been a beneficiary of improving lead indicators. Our focus is on finding attractively valued companies with good prospects for cash generation and dividend growth over the longer term