- Eurozone shares experienced a decline in October, driven by concerns over economic growth and uncertainty surrounding the outcome of the US presidential election.
- Within the MSCI Europe index the real estate, IT and materials sectors fell, while only energy sector posted gains.
- Automaker Renault rose after confirming its guidance for the full year, while Finnish marine and energy industry equipment manufacturer Wartsila faced challenges after third-quarter orders fell short of expectations.
The Fund’s A5 share class returned -2.4%* in euro terms in October. This Fund’s target benchmark, the MSCI Europe Index, returned -3.3%.
Eurozone shares experienced a decline in October, driven by concerns over economic growth and uncertainty surrounding the outcome of the US presidential election. The weakest-performing sectors were information technology (-7.2%), real estate (-6.8%) and materials (-6.5%). In contrast, only the energy sector (+0.2%) posted a positive return for the month.
As the Q3 earnings season progressed, there were a few notable weaker-than-expected releases within the information technology sector. The consumer discretionary sector also faced setbacks, with quarterly updates from several car manufacturers and some luxury goods companies falling short of market expectations.
In October, the European Central Bank (ECB) reduced interest rates by 25 basis points. However, a rise in inflation and an accelerated pace of economic growth suggest that further rate cuts may not be imminent.
Bucking the trend of poor performance among automakers was Renault (+9.0%) after it confirmed its full-year guidance, while Q3 revenue rose to €10.7 billion. The manufacturer still expects a group operating margin of at least 7.5% this year, and free cash flow of €2.5 billion or more as it benefits from new models including the R5 electric car and updated Dacia sport utility vehicles.
Also among the stronger performers was Spanish bank Caixabank (+5.7%) after it released robust earnings, an improvement in guidance and a surprise share buyback announcement. In its Q3 earnings, the bank announced a net profit increase of 3% year-on-year, amounting to €1.57 billion, with a notable 20% surge in new lending. This performance is underpinned by solid customer fund growth, an increase in net interest income and a robust Spanish economy.
Despite posting a fairly stable Q3 results release, Atlas Copco (-12%), the Swedish multinational industrial company, led the detractors over the month following negative read-across from semiconductor equipment maker ASML’s profit warning.
Also among the detractors for the period was Wartsila (-12%) after the Finnish marine and energy industry equipment manufacturer’s third-quarter orders fell short of expectations, while its margin outlook for the fourth quarter was seen as negative.
Shares in Michelin (-14%), the French tire maker, fell sharply after it lowered its full-year earnings forecast to around €3.4 billion versus a previous forecast of more than €3.5 billion as high interest rates, lower consumer confidence and uncertainty over the pace of electrification impacted new car sales in various regions.
Positive contributors to performance included:
Renault (+7.5%), Solvay (+5.3%) and Caixabank (+4.2%)
Negative contributors to performance included:
Atlas Copco (-12%), Wartsila (-13%), Michelin (-15%)
KEY RISKS
Past performance is not a guide to future performance. The value of an investment and the income generated from it can fall as well as rise and is not guaranteed. You may get back less than you originally invested.
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