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Euro 2016

In July 2016, Portugal won its first UEFA European Championship.  Before the tournament kicked off in June, we asked our analysts to take a look at which markets might be affected.

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Euro 2016 and the stock market

UEFA Euro 2016 marked the first occasion when 24 teams contested the Henri Delaunay cup. Since its inception in 1960, the tournament has continued to grow, and in 2016 almost half of UEFA’s 54 member associations contested the European crown.

This increase in participation coincided with a rising profile for the championships, but did it have any impact on the markets? We hosted a Q&A session with our analysts to find out whether traders should be paying attention to what happens beyond the pitch during Euro 2016, and which stocks might be affected by events during the tournament. 

Sporting goods and retail

Josh Mahony, IG UK

'Sporting goods companies, dominated by Nike and Adidas, are clear beneficiaries. Aside from the extra replica kit sales during a football tournament for example, they get their goods on the top footballers and athletes on the planet in front of a worldwide television audience. There’s no better exposure for a brand than that.'

Chris Beauchamp, IG UK

'It’s impossible to say how a single event impacts on revenues for the individual companies. They don’t provide any sort of break down. But yes, there’s no doubt that the overall marketing power of each company pays off as they dominate events around the globe in every major sport. Nike made revenue of $30.60 billion in its last financial year, up from $20.12 billion four years earlier, while Adidas made €17.60 billion, up from €13.32 billion four years previously. Contrast that with the €3.39 billion in revenue that Puma made in its last financial year, up from €3.01 billion four years earlier.'

How they did

Despite a brief rally during the tournament, 2016 was a year to forget for Nike with shares down 20% by the start on November. That performance was put into stark contrast by Adidas, up more than 70% over the same period.

Travel and tourism

Josh Mahony

'Airlines, transport companies and hoteliers all get a lift due to the increase in visitor numbers around a major sporting event. If there’s major infrastructure work required, then this can give a boost to the construction companies winning the tenders in the run up to the event. Local businesses like retailers can also benefit, and there are individual companies like temporary power supply providers and security providers who can see a profit boost if they win the contracts. Broadcasters and media companies get a lift from the higher demand for advertising during events. However, the broader economy can be a loser during an event, as productivity drops as workers take time out to watch matches or events.'

Alexandre Baradez, IG France

'In the case of hotels, Accor’s stock has been performing well since mid-February, but started to retract in June as it tracked the wider European stock indices lower. The global macro-economic and political concerns are driving the direction of stocks in the near term. Any positive impact on Accor’s bookings being thanks to the tournament will become evident once it reports its results for the quarter later in the year.'

How they fared

Accor shares continued to retract after Euro 2016, and were down around 5% three months after the tournament ended. A solid earnings call did arrest the decline in its share price, but failed to lift back shares to their pre-tournament highs. 

Advertising, media and infrastructure

Filippo Diodovich, IG Italy

'Government funds for new infrastructure will give a boost to the construction companies that win the new contracts. The media industry should be able to drive bigger returns as prices for advertising space increase.'

'However, companies need to put in the effort to derive maximum benefit. If companies have planned investments strategically they should see a return. But sport events can hurt the companies who have spent too much without proper planning.'

Alexandre Baradez

'TF1 will broadcast 22 matches during Euro 2016. The channel has paid €40 million for the rights, included €25 million for matches shared with French peer M6. We can’t be sure it’ll make a profit, but it also offers pretty good visibility and it is good for the global image. In the short term, shares of both TF1 and M6 are under pressure as concerns about the upcoming EU referendum in the UK and the global economy weigh on global stock markets. Indeed, volatility in the French stock market is at its highest since the market crisis of January and February. However, we may see any positive effects for the broadcasters come through in the second half of the year.'

How they fared

As predicted, the UK’s vote to leave the EU in June proved to be bad news for TF1 and M6. But it proved far more disastrous for TF1, with a share price drop of around 20% four days after the vote. 

Q&A with the analysts

What are the benefits and problems of hosting a sporting event?

Gregor Kuhn, IG Germany

'In the long run, Germany has benefited from the modernization of football stadiums and infrastructure. In terms of infrastructure these huge investments have paid off. During the tournament itself, the goal of transporting half of all World Cup visitors by train was exceeded. Deutsche Bahn transported 15 million travellers to the World Cup matches. Hotel stays rose by almost a third compared with the previous year – an additional 700,000 overnight stays. According to one study, net national tourism income benefitted to the tune of 900 million US dollars.'

Josh Mahony

'But it’s not just the hosts who benefit from a major football event. Consumer spending can also rise in the countries of the teams involved, as fans buy replica kits and organize parties around the games. The longer a team stays in the competition, the bigger the impact will be as the feel-good spending continues.'

Did France being awarded the Euro 2016 tournament in May 2010 affect the markets at all? And will there be any impact during the tournament itself?

Alexandre Baradez

'Unfortunately, May 2010 was a shaky month for the stock markets, as the Greek crisis rumbled on and there was a so-called ‘flash’ crash in the US markets. The increased volatility due to these crises masked any potential positive effect that the news of the EURO 2016 host nation status had on the French stock index, the CAC40.

'The tournament also coincides with a massive month for global markets. The US Federal Reserve’s rate decision and the UK referendum on continued membership of the EU, for instance, are both major events.'

How can France benefit from being the host this year?

Alexandre Baradez

'France’s economic situation improved in the first quarter, helped by a jump in consumption. While the second quarter could be impacted by adverse weather conditions and social conflicts, Euro 2016 should have a positive impact on consumption, tourism, transport, security, and the hotel industry, as we have already mentioned. One estimate shows that 94,000 people are indirectly employed for this competition, including 40,000 in services, and 562 French companies are involved in the event.'

What type of event is more financially rewarding or risky: Olympics, World Cup, European Championships or Rugby World Cup?

Josh Mahony

'Without a doubt the Olympics is the riskiest event to hold. It often requires the most new infrastructure and investment in events’ venues, and it’s the most difficult to ensure there’s a lasting legacy that continues to pay back. Football tournaments are mainly held in countries with existing venues. The upgrades to these venues can actually benefit the local teams and leagues that use the stadia in the aftermath of the tournaments. It’s a similar story for Rugby, which is always played in a country with existing venues and has the infrastructure to cope with the relatively lower level of visitor influx.'

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