European Opportunities Trust PLC has published a new fact sheet on its website, providing details of portfolio holdings and past performance statistics as of the end of November. The total return on the company's NAV in November was 7.9%, while the total return on the company's share price was 10.3%. In comparison, the total return on the company's benchmark, the MSCI Europe index in Sterling, was 5.5%.
The US Federal Reserve's indication of the end of rate rises has resulted in a shift in sentiment. Moderating inflation in the US and Europe is seen as paving the way for interest rate cuts. Economists expect the Fed to start cutting rates in late 2024 and the ECB at the end of 2024. In Europe, inflation is falling, with economists expecting the core rate to remain under 4.0% this year. In the US, inflation has slowed, with core inflation falling to 4.0%. However, this progress is set against slower economic growth. The ECB is expected to cut its 2023 and 2024 forecasts to 0.5% and 0.8%, respectively. In contrast, the US GDP expanded by 5.2% in the third quarter of this year, with forecasters expecting 2.4% growth for 2023. The company's investee companies have more global reach than the average in Europe, allowing them to tap into better-performing parts of the world, such as China and India.
The optimism around interest rates has been reflected in strong stock market performance. However, revenue numbers and third-quarter earnings across the market were not impressive, with luxury goods and drinks companies reporting subdued results. Defense companies, led by Rheinmetall, are increasing expectations. In contrast, the company's portfolio companies reported very good results for the third quarter. Experian, Infineon, Dassault Systemes, Deutsche Boerse, ICG, Grifols, and Ryanair were among the top contributors to performance in November. Bayer was the biggest detractor, with the scale of its problems being revealed. Genus shares were also affected by negative sentiment, but the company is in an excellent state overall. Edenred shares weakened due to regulatory threats in France, while Darktrace shares slightly detracted from performance.
Trading activity was higher than usual, and the company took the opportunity to reduce its gearing in normal market conditions. The company had £10 million of borrowing facility at the end of November.