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Stock markets and football sometimes mix well

  • The 2024 European Football Championship starts today

  • History points to strong stock market performance for the host country

  • Major sporting events held in the eurozone could boost growth

  • ECB to monitor consumer sentiment more closely

With the market digesting the latest developments, it is time for football on both sides of the Atlantic Ocean. The 2024 European Football Championship starts in Germany, followed by the Copa America tournament a week later. The euro as it is called, which is held every four years, is one of the most watched tournaments with lots of glory and prizes in store for the winning team.

Historical analysis applies to football events

Non-market events like football sometimes confirm one of Charles Dow's key principles, that history repeats itself. As such, putting in the mix the popular Eurovision Song Contest, the European Football Championship and the imminent Olympic Games one could find some patterns in their recent history.

More specifically, Switzerland won the 2024 Eurovision for the first time since 1988 when West Germany was the host of the European Football Championship tournament. Unfortunately for the Germans, their arch-rivals, the Netherlands, lifted the trophy. A repeat of this outcome could displease the Germans with an associated impact on their high productivity and a comparable hit on the government’s very low popularity.

Following the completion of the European football tournament, France will host the Olympic Games for the first time since 1924. The last time that two European countries hosted these two major sporting events was in 2004 when Greece shockingly won the European football championship before hosting the summer Olympics. Could this mean that the French team should be preparing to celebrate its third football trophy and hence trigger some much-needed pick-up in consumer spending and productivity?

Do football tournaments impact stock market performance?

Putting aside football history, is there a market benefit from the European football tournament? An analysis of stock market performance of both the host and trophy-winning countries after the completion of the respective tournaments shows some interesting results. Data since 2000 has been used and the STOXX Europe 50 index has been employed as the benchmark.

As seen in table 1 below, the equity index of the respective host country tends to outperform the benchmark index. This tendency has an economic explanation as (a) the arrival of thousands of fans boost consumption in the host country and (b) there is extensive advertising abroad of the host country’s cities and landmarks thus boosting expectations for increased visitor numbers and higher profits for the tourism industry going forward.

Despite the glory for the winning team, its respective stock index does not manage to outperform the host country’s stock market, or the benchmark selected. There are of course some notable exceptions like the Greek stock market in 2004, but this performance was the product of the overall positive sentiment in the country following the adoption of the euro and the preparations for the 2024 Summer Olympics.

Could the next ECB rate cut be pushed further out due to football?

Despite the ECB announcing its first rate cut since 2019, the outlook for the rest of 2024 remains unclear. Most ECB members appear convinced that further significant progress on inflation must be made to announce another rate cut, despite strong expectations for a September move.

Following the European elections outcome that resulted in political developments in France, the two major sporting events could provide a growth boost to the two largest euro area economies. Germany is in great need of a consumer sentiment lift, while France is muddling through another parliamentary election. A win at the European football tournament and the successful hosting of the Olympics could go a long way towards boosting morale and consumer appetite.

Therefore, over the next few months the ECB is expected to pay closer attention to both the consumer sentiment indices and retail sales reports in order to gauge the overall impact on these economies.

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