The European equity market delivered a positive return in August. Positive earnings delivery, guidance upgrades and analyst revisions have been a key feature of the latest corporate reporting season, supporting the strong market performance year-to-date. That said, commentary from management teams point to continued headwinds from supply disruption, rising freight and distribution costs, and increasing labour shortages. This continues to be a key talking point as part of our engagement with companies. On Covid-19, the spread of the Delta variant has caused cases in Europe to rise, denting consumer confidence. However, most large eurozone countries have now vaccinated over 70% of their population against the virus and hospitalisation rates have remained much lower than in previous waves.
The L&G European Equity Income fund outperformed its benchmark in August. Stock selection accounted for the outperformance, driven by our names in Financials and Basic Materials. Sector allocation was a small negative, led by our underweight allocation in Technology. At the stock level, the top positive contributions came from Wacker Chemie, Merck KGaA and not owning LVMH. Negative contributions came from Daimler and not owning ASML.
In terms of portfolio activity, we sold our position in automotive supplier Hella following the attractive price attained on bidding news.