News & Analysis

The European Super League and the FX and indices advantage

Andrew Saks, Wednesday, 21 April 2021

 

I know absolutely nothing about football.

The full extent of my extremely scant understanding of this historic sport which can trace its roots back to the ancient Greek, Egyptian and Roman empires, other than it involves a group of physically fit young athletes to convene of a morning in order to kick a spherical piece of leather around a freezing cold mud patch whilst an abundance of eager spectators stand in the pouring rain to look on with fervent enthusiasm.

The history of football and to whom it is of interest to is a subject for debate, however what is absolutely not debatable whatsoever is the stratospheric value of the football clubs themselves, and the high rollers that participate it at top level.

Yesterday, even a luddite who shares my absolute lack of understanding of this immensely popular pastime which has transformed over recent years into a global enterprise worth billions of pounds could not help but have their attention distracted by it.

That is because football, especially in England which leads the world in terms of prestigious clubs with vast resources and purchasing power, is a dominant force in business and corporate prowess.

What has a few meetings between enviably fit and revered young men got to do with the currency and stock markets?

Quite a lot actually.

As with any enterprise that has generated enormous revenues over a sustained period of time, the football industry was curtailed for a year with no spectator tickets having been sold in various regions of the world due to mass events having been banned by various governments since March 2020.

Even though some sportsmen are now heading back onto the fields, the football season is over, and last year's revenues relied largely on sports subscriptions by domestic households to digital television companies who have been scrambling against Sky TV for exclusivity rights.

Now, a few channels televise football matches, and the subscriptions which are often relatively high, have been able to fuel the football clubs to some extent whilst providing a televised cure for insomnia.

Thus, the football clubs, many of which are publicly listed and whose stock is available for CFD trading as an OTC instrument as well as being a listed derivative on some of the world's most prominent stock execution venues in North America and Europe, have actually made some degree of greater headway than other hospitality and sports industries during the past year.

Steadily, the tens of millions of fans counted down a return to the field for their idols, garnering a steady environment for the stock and cash position of Britain's Premier League football clubs.

What happens, however, if suddenly a whole new set of rules and a whole new league for European giants appears and generates huge discourse?

Volatility, that's what!

Yesterday, an abrupt end was put to the short lived proposal to create a new European Super League, a concept which lasted just three days.

The European Super League was a proposed annual club football competition to be contested by twenty European football clubs.

The competition would consist of fifteen "founding clubs" which would be permanent participants in the competition and govern it alongside five other European clubs who would qualify based upon their performance in their domestic league's most recent season. It is planned as a breakaway competition to rival or replace the UEFA Champions League, Europe's premier club football tournament organised by UEFA.

Britain was represented by the most famous six football clubs, one of which is publicly listed Manchester United, which pulled out of the European Super League today, having followed the original dissenters, all of which are privately held.

Manchester United, listed on the New York Stock Exchange (NYSE:MANU) has a market cap of $2.4 billion and is down 6.03% this morning, having closed last night at 16.22.

That is not the big hit though.

The real news here is that Manchester United's stock has been ticking along very steadily at around the 16.00 mark for a long period of time, until it suddenly rocketed up to 17.69 by Monday April 19 as it joined the European Super League.

As the European Super League was culled before it even came to fruition, here we are just two days later and the stock is back down to almost exactly where it has been for a few weeks.

Thus, trading the news, even when it relates to sport, is a definitive source of volatility.

This is a great example of those who were invested being able to sell after the announcement of the European Super League, having seen the rising stock price experienced by Manchester United along with the absolute dissent by fans, members of the public and the football clubs themselves.

Today, discussions on the London Underground on the way to the office were dominated by debate between City workers on the ethical or indeed unethical "Americanization" of European football by investors in privately held and publicly listed clubs which had been associated with the proposed European Super League, and that it was "fuelled by greed" - a sentiment that has been echoed across mainstream media in commentary sections today.

If the City is talking about it, and if it genuinely is being viewed as a move that would seek to create financial gain for owners of clubs and shareholders, it must have market significance.

That is how movements come about.

As for the currency aspect, football is a huge part of the British and European economy. Looking at the knock back this has had on the potential profits for European members of the Super League and their American owners, it could cause some degree of volatility in the GBPUSD today.

Indeed, the GBP has been strengthening slowly against the USD, with it standing at 1.39 USD to the GBP this morning.

The resurgence of the British pound is definitely showing, and has been all week, and it looks like those who actually understand the rules of football and follow it with dedication will be as pleased as the traders who follow its financial position.

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