- European markets faced sustained pressure in December, driven by global uncertainties and cautious investor sentiment.
- Pandora was again among the top performers, rallying on November’s upgraded guidance, while Hermes defied sector challenges with another strong performance.
- Novo Nordisk shares fell after clinical trial results for its obesity drug showed meaningful weight loss but missed high investor expectations.
The Fund’s A5 share class returned 0.2%* in euro terms in December. This Fund’s target benchmark, the MSCI Europe Index, returned -0.5%.
European markets faced sustained pressure in December, driven by global uncertainties and cautious investor sentiment. Concerns over anticipated US trade policies under President-elect Donald Trump, coupled with persistent geopolitical tensions, weighed on market performance. In response to these challenges, the European Central Bank (ECB) took further steps to support the economy, cutting its deposit rate by a quarter percentage point to 3%. This marked the ECB’s fourth rate cut in 2024, reflecting its commitment to easing borrowing conditions.
From a sector perspective, consumer discretionary (+4.3%), information technology (+4.1%) and financials (+1.7%) were the only areas to post a gain over the month, while real estate (-6.0%), healthcare (-4.4%) and utilities (-3.6%) slid the most.
Despite limited newsflow in December Pandora's (+15%) shares rallied further as investors continued to digest November’s upgraded financial guidance. The jewellery retailer now projects organic growth of 11-12% for the year (from 9-12%) and maintained a stable EBIT margin forecast of around 25%
Despite a tough year for its sector, Hermes (+12%), the French luxury fashion house, continued to buck this trend, posting another solid month of performance. In December, Hermes received an upgrade to a buy rating by a covering analyst, reflecting growing confidence in the company's ability to deliver consistent results and navigate headwinds facing the broader luxury industry.
Shares in Renault (+16%) rose primarily due to reports of potential merger talks between Nissan and Honda. As Renault holds a significant stake in Nissan, such a merger could enhance the value of Renault's investment and open new strategic opportunities.
Shares in Danish drug maker Novo Nordisk (-18%), known for its blockbuster drugs Ozempic and Wegovy, fell sharply after the company released results from a clinical trial for its experimental obesity drug, CagriSema. The trial showed that CagriSema helped patients lose an average of 22.7% of their body weight in a late-stage study, falling short of the trial's 25% goal.
While the results were still significant and demonstrated meaningful weight loss, they did not fully meet elevated investor expectations. However, the company attributed the lower than expected efficacy to the protocol (as patients have a choice of staying on the lower dose to have fewer side effects or taking the higher dose which shows greater efficacy but with the risk of greater side effects). Following these results, the company intends to initiate another Phase 3 trial with a different protocol to optimise weight loss.
Inditex (-5.3%), the owner of the Zara retail chain, reported slower sales growth at the outset of the crucial holiday shopping season. The Spain-based retailer said revenue, excluding currency swings, grew 9% in the five weeks to 9 December, compared with 14% during the same period a year earlier. This figure also lagged behind the company's sales growth for the nine months leading up to October 2024, signalling a deceleration during a key seasonal shopping period.
The retailer highlighted currency headwinds as a significant factor impacting performance. The strength of the euro against most global currencies, coupled with depreciations in the Brazilian real and the Mexican peso, created an unfavourable exchange rate environment, which weighed on sales and pressured profit margins during the third quarter.
Positive contributors to performance included:
Renault (+16%), Pandora (+15%) and Hermes (+12%)
Negative contributors to performance included:
Novo Nordisk (-18%), Novartis (-5.7%) and Industria de Diseno Textil (-4.9%)
The investment objective of the Fund is to achieve capital growth over the long-term by predominantly investing in a portfolio of European equities. The Investment Adviser will seek to achieve the investment objective of the Fund through investment of at least 80% of the Fund’s Net Asset Value in companies which are incorporated, domiciled, listed or conduct significant business in Europe (the EEA, Switzerland and the UK). The Fund will not be restricted in its choice of investment by either size or sector.
The Fund is considered to be actively managed in reference to MSCI Europe Index (the “Benchmark”) by virtue of the fact that it uses the Benchmark for performance comparison purposes and for certain Performance Fee Share Classes, to calculate performance fees. The Benchmark is not used to define the portfolio composition of the Fund and the Fund may be wholly invested in securities which are not constituents of the Benchmarks.
The Fund is not expected to have any exposure to financial derivative instruments in normal circumstances, but the Investment Adviser may on occasion, where it deems it appropriate in seeking to achieve the investment objective of the Fund, use financial derivative instruments listed on a recognised exchange or traded on an organised market or financial derivative instruments traded over-the-counter for investment purposes, efficient portfolio management, and hedging purposes.
In addition, the Fund may invest in exchange traded funds and other eligible open-ended collective investment schemes. No more than 10% of the net assets of the Fund will be invested in aggregate in open-ended collective investment schemes. The Fund may invest in closed-ended funds that qualify as transferable securities. Investment in closed-ended funds is not expected to comprise a significant portion of the Fund’s net assets and will not typically exceed 10% of net assets.
For liquidity or cash management purposes, a proportion of the Fund may also be invested in debt securities including government and corporate bonds, Money Market Instruments, cash and near cash and deposits. Any investment in bonds will be in investment grade corporate and government fixed or floating rate instruments.The Fund is considered to be actively managed in reference to the MSCI Europe Index (the “Benchmark”) by virtue of the fact that it uses the Benchmark for performance comparison purposes and to calculate performance fees. The Benchmark is not used to define the portfolio composition of the Fund and the Fund may be wholly invested in securities which are not constituents of the Benchmark.
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