How the FIFA World Cup affects businesses, markets and share prices around the world

The World Cup has officially kicked off, giving way to a month of football that is watched around the globe.

While sporting events typically have little impact upon financial markets, the sheer size of this tournament means that there are likely to be elements of the market which are affected, according to Joshua Mahony, a market analyst at IG London.

“A research paper from the European Central Bank (ECB) and central bank of the Netherlands has highlighted the influence the World Cup can have upon market volumes,” he said.

“In particular, the effect can be felt most keenly at times when there is a major game taking place during market hours, with volumes falling (48% in 2014 and 36% in 2010) in the local market during a match. This figure is further reduced by 10% around the time of a goal.”

He added that these periods can also see the local market decouple from global events impacting price action at the time.

Therefore, for example, if US President Donald Trump made a major economic announcement, the German DAX would feel the repercussions less keenly if Germany were playing at the time, Mahony said.

“This of course allows for significant opportunities to trade the temporary differentials between similar markets during football games,” he said.

“One of the key areas to watch from a political standpoint is whether the Russian ruble can reverse some of its 2018 losses as the country seeks to receive a reputational boost while playing host to the world.

“The actions of both Russian fans and Russian hospitality is going to be key, with President Vladimir Putin understanding that there are significant PR benefits to running a positive tournament. Quite whether it will create enough goodwill to start the shift towards reducing the sanctions is another matter.”

Local winners

Mahony also notes that the World Cup brings about a range of benefits to businesses that can carve out their own part of the month-long football festival.

As the winners from the competition are typically well established, supporters are more inclined to visit pubs for big games – boosting revenues for pub chains, he said.

“Conversely, many people will decide to stay in to host matches, driving up sales of big screen TVs, takeaway food, and alcohol,” he said.

“Thus investors will be looking towards supermarkets (Tesco’s, Sainsbury’s, Morrison’s, etc), delivery firms (Just Eat, Domino’s Pizza), and consumer electronic names such as Dixons Carphone.

“Airline groups such as International Airlines Group (IAG) are also likely to benefit from the event, with customers more willing to pay peak prices to take a certain route rather than choose their destination based on pricing factors.”

The tournament isn’t all roses for everyone though, with certain sectors traditionally taking a hit around the World Cup, Mahony said.

“There is likely to be a downfall in demand for ordinary evening activities, nightclubs, cinemas, and restaurants. This is where delivered food seems to take precedence over eating out.

“With more time spent in front of a screen, the 2014 World Cup saw a slump in demand for home improvement products and home furnishings, thus putting pressure on firms such as Kingfisher and DFS.”

Read: TV vs streaming – how South Africans plan to watch the FIFA World Cup

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How the FIFA World Cup affects businesses, markets and share prices around the world