European equity markets performed well through April as they recovered from March lows. Investors appeared willing to look through the sharp downturn in economic data, as risk sentiment improved with increasing evidence that the curve of the infection rates for the coronavirus virus are progressively peaking. This is encouraging news though there remains a high degree of uncertainty as lockdowns begin to be relaxed globally. Broadly, there was a continuation of good returns for defensives, momentum and quality growth styles. However, with hopes of an end to the crisis, we saw some improvement in cyclicals, value and financials towards the end of the month.
Earnings season is now in full swing. Q1 results arguably carry perhaps the lowest relevance, given the economic damage is largely accelerating. Much of the focus continues to be on balance sheets, financial outlook and dividends. Meanwhile, accommodative central bank policies and some form of lockdown easing is being viewed as a positive for a rebound in economic momentum in H2.
The L&G European Trust continued its strong YTD performance, with an absolute return of 9.4% in April. Stock selection within industrials, materials and both consumer sectors were the leading positive drivers. Sector allocation was broadly neutral. At the company level, structural growth names Shop Apotheke, Alfen, Umicore and Infineon were leading outperformers. There was also good contributions from Nacon, Adyen and SOITEC. For activity, we introduced game producer Embracer Group and wind turbine manufacturer Vestas Wind Systems. Positions in Airbus and Epiroc were sold.