Search the Internet          Tips  Sites: Finance, Investment

World Cup is a distraction for financial markets

Nigel Stephenson

Need to do some business on London's financial markets in the next month? Probably best to choose your moment carefully as many traders will have at least half an eye on the soccer World Cup.

The 32-team tournament kicks off in Japan and South Korea on Friday. Thanks to an eight-hour time difference, many of the games will be played while traders in London's City financial district are, or should be, at their desks.

The earliest matches kick off at 0630 GMT, just half an hour before many London markets open.

"Some might argue that traders and dealers are at their sharpest in the morning. Clearly that is not going to be the case over the next month," said Jim O'Neill, head of global economics research at investment bank Goldman Sachs.

London is home to the $400-billion-a-day foreign exchange market and the Eurobond market, among others.

"Unless there's a nuclear war, there's nothing that's going to distract people from the football, especially any games that are being played during trading hours," said a forex dealer at a US bank.

Banks say their traders will keep their eyes on their work and be ready for business but many acknowledge that the football, and particularly England's games, will limit activity.

On the other hand, spread betting firms expect the World Cup to be a boom time as they offer wagers on anything from the fastest goal to the number of players booked for diving.

Football fever is likely to break out in other dealing rooms across Europe.

Istanbul floor traders say only a lively market would stop them watching games on screens in the bourse cafeteria.

"If the market is busy at that time, even if Turkey is 10-0 up against Brazil, I don't think anyone will be watching," said Murat Ozkaya, secretary general of the Association of Exchange Professionals. Turkey face Brazil on June 3.

Goldman's O'Neill, who has written a 56-page report on the World Cup and economics, said London markets would be quieter than usual, especially during England's needle match against arch-rivals Argentina, kicking off at 1130 GMT on June 7, which coincides with the traditional Friday lunchtime pint for many in financial markets.

DESERTED DEALING ROOMS

"I would think a week on Friday, against Argentina especially, most dealing rooms will be a bit of a desert.

"We will have a policy where all desks are manned but probably not with the same numbers that we normally have."

Traders say many stock markets have been dull for some time and the World Cup will come as welcome relief.

"I have a TV on my monitor and I am going to follow the matches," said a trader at a Milan brokerage who will be following the progress of former champions Italy.

A Stockholm equity trader said business would be affected. "Everybody will be cheering on the Swedish team. It's going to be very quiet in the dealing room because everyone is going to be watching TV."

In an effort to prevent a mass epidemic of "sick leave", Britain's Department of Trade and Industry has urged employers to offer staff flexible working hours where possible to allow them to watch the soccer.

Credit card issuer Barclaycard has estimated that 40 per cent of UK soccer fans will take a day off to watch the football, costing the economy £1.2 billion for the first round of three matches and £3.2 billion if England get to the final.

The Confederation of British Industry employers' organisation, while disputing the potential cost of a mass "sickie", said bosses' response to the call had been positive.

However, market hours are anything but flexible and the financial sector is having to make other arrangements.

WORLD CUP BREAKFASTS

Some companies, such as Barclays, Reuters Group and Moscow Narodny Bank are using the tournament as an opportunity for corporate entertainment. Moscow Narodny is offering guests a full English breakfast as they watch Russia's games against Tunisia and Belgium.

ABN AMRO is showing England games on plasma screens in the trading room "business permitting" and on a big screen in the atrium of its London offices. Barclays Capital is setting up screens in the staff canteen.

"Staff are free to watch as long as the clients are not affected," a Barclays Capital spokeswoman said.

But not all employers are as understanding. A government bond trader at a bank in Germany said his bosses had ordered access to television sports channels barred.

"Our bosses are pretty well aware that it could affect our attention to market movements," the trader said.

With banks having cut thousands of jobs in the past year as economic gloom hit profits in the sector, can staff afford to watch the matches?

"I don't think anyone is voluntarily going to be seen with their feet up on the desk watching telly," said one London bank official.

So will trade in the market be lower when the matches are on? The London Stock Exchange said it will monitor trade hour by hour on the day England play Argentina. In fact, when England beat Tunisia 2-0 in an afternoon game in the 1998 World Cup, volume on the exchange was above average, a spokeswoman said.

One sector of the financial markets likely to be busier than usual is the spread-betting firms.

"Frantically busy," said Cantor Index spokesman David Buik. "World Cup betting has really started."

Wally Pyrah, spokesman for Sporting Index said the World Cup would probably be the biggest sports betting event ever. The firm, which takes 40 per cent of its bets online, expects to take bets worth about £15 billion.

"The traders will be exceptionally busy but the online business does give us a great help," Pyrah said.

Among the exotic bets available is one called the Red Cross, named after England's national flag and for its association with hospitals, on how many England players will be carried off injured during the tournament.

If England captain David Beckham's injured foot plays up again, not everyone in London's dealing rooms will be in despair.

ALSO READ:
The Rediff Budget Special
Money

Tell us what you think of this report