European markets continued to rise in April. Solid quarterly earnings offset ongoing economic uncertainty, with the US debt ceiling inevitably back to centre stage. Nonetheless, fears of economic slowdown persist. A significant example of this is OPEC’s decision taken at the beginning of the month to lower output quotas. This preventive measure is intended to maintain prices which have already declined by more than 25% y/y. In such a context, it was defensive and domestic stocks that fuelled markets. The fund rose +0.92% in April, compared with +1.44% for the benchmark index.
At the micro level, the quarterly earnings season it in full swing. Results are good overall, with higher prices boosting corporate performance. Faced with the global conditions discussed above, investors are looking mainly at management forecasts.
The fund’s companies which are related to discretionary consumer spending and to the reopening of the Chinese economy published very encouraging results: LVMH and L’Oréal in particular, but also automotive companies BMW and Mercedes Benz Group. All report robust demand despite recent price hikes. Industrial groups such as Schneider Electric and MTU Aerospace have not seen a decline in activity. However, there has been a slowdown in order intake in the semiconductor sector. ASML is seeing orders fall below sales this quarter, while investors worry that positive news flow for Infineon may have peaked.
In April, the fund’s position in Smurfit Kappa was closed and Moncler was reduced, while other sectors were added to, such as technology (Carl Zeiss Meditec and Interpump).