Here is the stock market news for Tuesday May 21 with analysis from Meilleurtaux Placement experts.
The markets: The Fed shakes up the market!
European markets are losing ground this Tuesday, at the end of a session marked by low transaction volumes and without major economic news. In Paris, the CAC 40 lost 0.66% to 8,141 points, weighed down by STMicroelectronics and Teleperformance which lost 2.62% and 2.19% respectively.
This drop comes after a series of stock market records set last week, both in Europe and the United States, prompting investors to take some well-deserved profits, especially after recent interventions by members of the American Federal Reserve. Christopher Waller, one of the Fed governors, spoke this afternoon of the need for more evidence that inflation is slowing before a first rate cut. So be patient…
The markets are particularly attentive to the outlook of central bankers, awaiting the minutes of the latest Fed meeting which will be published tomorrow evening. This document is crucial for understanding the future directions of American monetary policy. At the same time, market attention remains focused on companies, notably with the expected results from Nvidia, the key player in electronic chips and artificial intelligence, which could significantly impact the technology sector and the Nasdaq.
Values: Clariane, Sanofi
Clariane, formerly Korian, the European leader in retirement homes presented its strategic plan for 2023-2026, and its refinancing project. After its stock market debacle, the company is targeting annual organic growth of 5%, driven by increased occupancy rates, outpatient activity and price adjustments, particularly in Germany. To improve its profitability, Clariane plans an increase in its gross operating margin, supported by growth in turnover and measures to reduce costs, rents and energy expenses.
The group is also implementing a refinancing plan of 1.5 billion euros, including capital increases. A first fundraising of 92 million euros, reserved for HLD Europe and other investors, will be followed by a second fundraising of 236 million euros, with preferential subscription rights maintained. The market reacted positively to these announcements, causing Clariane’s shares to jump by 7.61% on the Paris Stock Exchange, after an increase of 22.7% yesterday. Since the start of the year, the stock has gained 100%.
Sanofi has partnered with OpenAI, creator of ChatGPT, to develop AI software to accelerate drug development. This initiative also includes the American Formation Bio, a specialist in AI-driven drugs, which will contribute its engineering resources and development platform. Sanofi aims to become the first pharmaceutical company largely optimized by AI.
Its CEO, Paul Hudson, says these AI innovations are unprecedented and promise to revolutionize drug development. Formation Bio, founded in 2016 under the name TrialSpark, has the mission to reduce the costs and duration of clinical trials, a major obstacle to the arrival of new drugs on the market. Sanofi gains 0.94% this evening, to €90 (+0.25% in 2024). Find here our latest long-term update on this essential defensive value.
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Tomorrow in the headlines: 2,300 Billion…
A busy session awaits us! On the program for this Wednesday, the Japanese trade balance, British inflation, sales of old homes in the United States. But above all, two major news will be revealed in the evening: the report of the Fed’s last monetary policy meeting and the quarterly results of the giant Nvidia. The specialist in chips for AI is now capitalized at more than $2.3 trillion on the stock market. Its results are therefore crucial for the short-term trend of Wall Street… and by extension for that of Western stock indices. Unmissable action, member of the Magnificent Seven (see glossary), this publication will close the quarterly results season of major groups. Its consequences will only be felt from Thursday morning in Europe, with Nvidia publishing after the close tomorrow evening.
The world after: Goodbye Covid savings!
A study by the San Francisco Fed reveals that the savings accumulated during the pandemic by American households, the famous “Covid savings” of more than $2,000 billion, are now completely exhausted. This financial windfall, which supported consumption and helped cushion economic shocks during and after the pandemic, seems to no longer play an active role in the economy. In the United States, the disappearance of these savings has led to an increase in household debt, particularly credit card debt, which has reached record levels. At the end of 2023, American household debt totaled 17.5 trillion, or 600 billion more in just one year! Despite this, the U.S. economy is showing no immediate signs of slowing thanks to a robust job market and other forms of savings unrelated to the pandemic. In Europe, even if Covid savings partly remain (around 1,000 billion), they are mainly invested in illiquid assets, which limits its usefulness in stimulating consumption. The outlook therefore remains mixed regarding the use of these savings to boost economic growth… To be continued!
Glossary: The magnificent seven
The “magnificent seven”, also called the “mercenary seven”. On the stock market, this expression refers to the most powerful and influential American technology giants. Those who dominate the market and have largely contributed to the rise of the Nasdaq over the past year. This list is not strictly defined and can vary depending on the criteria used (market capitalization, influence in the industry, etc.), but it currently includes Apple, Microsoft, Amazon, Google (Alphabet), Facebook (Meta ) and recently Tesla and Nvidia.
The phrase “magnificent seven” is used informally and is not a standardized term in the financial world. Due to the dynamic nature of markets, the companies on this list may change over time.