We are now 7 days into the 2014 World Cup and what a great tournament it has been so far! After 16 games played so far at the time of writing, there have been only 3 tied games - which must be some kind of a record - and plenty of goals. There are usually several dull games at the beginning of the Group Stage as teams play cautiously hoping to avoid dropping points, but this time it has been different. Another strange fact: in all except 2 of the 13 games with a winner, the team that has equalized after going behind has gone ahead to win the game!
Holland 5 Spain 1
Last week I wrote that the results of these games can move markets, according to Goldman Sachs, so it is time for an update on that account. As we are still in the Group Stage, we only have one real candidate for a measurement, and that is the Holland vs. Spain game from last Friday. The result was a major surprise, with Holland beating the World and European Champions Spain by 5 goals to 1, an almost unprecedented result. The impact of the game would have given the Dutch renewed belief that they might be able to win the tournament, and have seriously shaken Spanish faith in the likelihood of their own eventual victory. As Holland and Spain both use the same currency, we cannot measure any possible market-moving effect of this match in the Forex market, so we have to turn to their respective equity markets instead. Logically, we might expect Holland’s major equity index to have outperformed the global benchmark on Monday, and for the Spanish market to have underperformed.
According to Bloomberg, the major equity indices in the Europe, Middle East & Africa region fell by an average of -0.28% on Monday. Holland’s major index outperformed the average, falling by only -0.15%. Spain’s major index underperformed the average, falling by -0.42%. Of the seven remaining indices that were not Dutch or Spanish, only one performed better than Holland’s or worse than Spain’s. So the hypothesis would have worked if applied last Monday to the result of this match, even though everyone had the whole weekend to let their gloom or euphoria dissipate.
Uruguay vs. England
Looking ahead, the next obvious game which might affect the Forex market will be taking place on Thursday night, when England take on Uruguay. Both teams lost their opening games, meaning that defeat for either side will effectively send them out of the tournament. The English public expects to qualify for the Second Round game and has not failed to do so for decades, so a defeat to Uruguay would produce a Friday morning gloom in London that might make the GBP underperform. An English victory would probably not have a pronounced effect as public opinion there seems expect the team to avoid defeat against Uruguay. William Hill is currently offering 6/5 on an England victory, 11/5 on a tie, and 12/5 on a Uruguayan victory. This shows that English bettors are heavily favoring an England victory. In other neutral countries however, the odds are generally slightly in favor of Uruguay, which just shows how much emotions come into play on these occasions.