The Effect of Euro 2016 on Financial Markets
The Euro 2016 football championship was the largest one in its history, incorporating 24 teams for the first time ever. This resulted in more matches, more fans and of course more money. From sponsorship increasing by 40%compared to the 2012 tournament, to more tickets being sold and higher TV revenues, it was a success all round (especially for Portugal fans).
As such a large event that involved hundreds of millions being spent, Euro 2016 also managed to have an effect on some of the world’s financial markets. While it hasn’t revolutionised capitalism, there are a few ways it impacted upon various financial markets.
Forex Trading
Before the tournament, UEFA predicted that over €2 billion in revenue would be gained, with some expecting around €1.3 billion of this to trickle down into the French economy. This would be a great boost to the French economy, which has been struggling with unemployment levels and low demand.
In a knock-on effect this will have provided a small boost to its currency, the euro. However, considering the Brexit result coincided with Euro 2016, most of the euro rising in value was a reaction to this. Plus, while there will have been increased spending on merchandise and other services (food and drink) during the tournament, it is unlikely to have seriously impacted many currencies in the long term.
The Stock Market
There has been a decent amount of research done into the effect international football tournaments have on global stock markets. Bizarrely, they do actually have an impact, with research showing the FTSE 100 suffers an average0.74 standard deviation drop, the equivalent of 0.81 percentage points, the day after England lose. This may only be a small amount, but considering England only won one game, it soon adds up.
France and, somewhat strangely, the Czech Republic are the second and third highest nations where their stock markets are affected by footballing performance. The same research has found that there is no significant effect should a country win a match.
There were also fears that up to £6 billion could be wiped off the stock markets after England’s relatively early exit. Being eliminated has been shown to have a negative effect on investor mood, and while it was only a 0.3% drop in the national stock market, it still adds up to a lot.
Sportswear Shares
Unsurprisingly, it was the stocks and shares of sports companies that benefited most from Euro 2016. Despite Nike gaining the most exposure throughout the tournament, it was actually Adidas that experienced the greatest share price rise. 61% of the boots worn at Euro 2016 were made by Nike, well ahead of Puma and Adidas, yet during the competition Adidas’ share price rose by +6.7%, consistent with the 60% growth throughout 2016 and more than Nike and Puma.
A pair of Puma boots may have been worn by the tournament’s top scorer, Antoine Griezmann, but the brand actually suffered a -3.6% drop in share price throughout Euro 2016. However, considering they’ve got some popular brand ambassadors and grown by 13% overall this year, they won’t be too concerned.
This all shows the power that an international football tournament can have on global financial markets, if only for a limited time.