by Patrick Fearon-Hernandez, CFA, and Thomas Wash

[Posted: 9:30 AM ET] | PDF

Our Comment today opens with a new update on the Summer Olympic Games, which begin on Friday. Importantly, there are reportedly hundreds of thousands of tickets still available. We next review several other international and US developments with the potential to affect the financial markets today, including hints that Mexico is getting ready to crack down on its unbalanced trade relationship with China and several notes on US industry developments.

France: Four days before the opening ceremonies of the Summer Olympic Games in Paris, unwanted tickets posted for resale online have topped 250,000, up from just 180,000 one week ago. Although a record 8.8 million tickets have been sold outright, hundreds of thousands are still available through the initial and resale channels, even for prestigious events such as Friday’s opening ceremonies (starting at 900 EUR) and the 100-meter sprint (ranging from 295 to 980 EUR).

United Kingdom: The new center-left government of Prime Minister Keir Starmer said it will ease and reform certain environmental-protection rules seen as inhibiting home construction and contributing to the UK’s chronic housing shortages. However, homebuilders say they haven’t yet seen details of the plan. It remains unclear whether the changes will indeed lead to greater homebuilding and, eventually, lower housing costs.

Mexico-China: At an event with top officials on Saturday, Mexican Finance Minister Rogelio Ramírez de la O complained that China-Mexico trade has become extremely unbalanced, with China exporting more than 10 times as much to Mexico as Mexico exports to China. The statement was echoed by incoming Economy Minister Marcelo Ebrard, who will take office in October when President-Elect Claudia Sheinbaum is inaugurated.

• The complaints by Ramírez de la O and Ebrard show how even less-developed countries have become alarmed by “China Shock 2.0,” in which Beijing has rechanneled massive resources into manufacturing, effectively flooding the world with exports at disruptive, fire-sale prices.
• Importantly, Ramírez de la O hinted that the Mexican government is considering changes to its foreign investment rules to address the risk that Chinese firms will set up shop in the country merely to export tariff-free to the US — at the expense of Mexican firms.

US Politics: New reports say Vice President Kamala Harris has gained voting commitments from more than half the delegates to the Democratic Party convention in August, putting her on track to lock down her nomination as the party’s official presidential candidate. Separately, the Financial Times today carries an interesting article predicting President Biden, now a lame duck, will use his remaining six months in office to focus on cementing his legacy in foreign policy, with a focus on the Middle East and Ukraine.

US Artificial Intelligence Industry: Nvidia, the AI chipmaker darling, said it is developing a new chip designed to be sold in China without violating the increasingly stringent US export controls against such sales. Nvidia has already designed several chips for the Chinese market, but its sales in China nevertheless dropped to 17% of total revenue in the year to January, versus 26% two years earlier. The new chip aims to boost the company’s Chinese sales, but ever-tighter export rules from the US could derail those plans.

US Cryptocurrency Industry: The Securities and Exchange Commission yesterday afternoon approved the first exchange-traded funds for spot ether, the second-biggest crypto token after bitcoin. The new ether ETFs are expected to be available as early as today.

US Healthcare Industry: The House Committee on Oversight and Accountability has issued a report showing pharmacy-benefit managers steer patients toward higher-priced medicines and affiliated pharmacies, even though they’re supposed to help consumers cut drug costs. The report, issued after a 32-month investigation, will be followed today by a committee hearing on the matter at which top PBM officials will testify.

• The report and hearing suggest Congress could eventually pass new regulations on PBMs.
• That could weigh on the stocks of top healthcare companies, such as UnitedHealthcare, Cigna, and CVS, which have large PBM businesses.

US Auto Industry: According to data firm Motor Intelligence, the average incentive package on a new vehicle sold in June was up 53% from the same month one year earlier. JD Power also said only about 17% of new cars sold above the manufacturer’s suggested retail price in June, versus 35% a year earlier. The weakening price dynamics for new vehicles suggest demand is waning in the face of high prices, high interest rates, and a weaker job market. The bright side is that weaker auto prices should eventually feed into lower inflation and interest-rate cuts.

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