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World Cup 2018: Who are the winners and the losers?

With the World Cup underway, which markets will be expected to benefit or suffer from the biggest sporting tournament in the world?

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Source: Bloomberg

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. 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. 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. These periods can 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 DAX would feel the repercussions less keenly if Germany were playing at the time. This of course allows for significant opportunities to trade the temporary differentials between similar markets during football games.

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.

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Closer to home, the World Cup brings about a range of benefits to businesses that can carve out their own part of the month-long football festival. The winners from this competition are typically well established, with supporters more inclined to visit pubs for big games, boosting revenues for pub chains such as Mitchells & Butlers. Conversely, many people will decide to stay in to host matches, driving up sales of big screen TVs, takeaway food, and alcohol. 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.

One of the regular talking points around the tournament is over which sports shirt manufacturer will come out on top. The war of the big two sees Nike sponsoring the favourites Brazil, alongside the likes of France, and England. Meanwhile, Adidas will be hoping Spain, Germany or Argentina could provide a boost to sales in the event that one of their big teams win the tournament. Beyond that, there is likely to be a greater pickup in sales across the whole industry thanks to an increase in shirt sales, and people seeking to take up the sport.

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

This information has been prepared by IG, a trading name of IG Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication.  Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. 

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