Brazil gains some World Cup consolation with performance of stocks

Germany may have humiliated Brazil on the pitch, but Brazilian stock exchanges have outperformed Deutschland's. Perhaps there's more to life than football.

Brazil’s MSCI index had outperformed Germany’s DAX by 5.51 per cent since the opening ceremony of the Fifa World Cup. Marcos Issa / Bloomberg News

Germany may have bested Brazil on the pitch, but Brazilian stocks outpaced their sluggish Teutonic rivals.

Fireworks and car horns blasted through Berlin’s streets after Germany’s 7-1 semi-final victory over Brazil on July 9. And the euphoria was compounded four days later when 22-year-old Mario Götze volleyed into the top corner of Sergio Romero’s net in extra time to see Deutschland add a fourth star to their crests.

But despite the all-night parties beside and presumably within the Bundestag, it was Brazil’s bourses that were lifted on bets that a government construction drive and an influx of tourists would lift the host nation’s economy and equities.

Goldman Sachs analysts, in a research paper published before the Fifa World Cup, noticed that trophy winners on average achieved a 3.5 per cent boost compared to world exchanges in the month following victory. But after an initial bounce higher the morning after Germany’s DAX has dipped 0.64 per cent since last Sunday’s final.

But compare total returns on German and Brazilian equities since June 12, when Brazil defeated Croatia in the tournament’s opening match, and you can see an entirely different tournament unfold.

The German bourse led Brazil’s from the opening match – in which Brazil beat Croatia 3-1 – until the close of trading on July 9, when the DAX led the MXBR – MSCI’s Brazil Index – by 1.06 per cent.

Perversely, after Brazil was massacred in the semis, it was the DAX that suffered the next morning. Defeat for the hosts was sweetened by victory on the exchanges, as the MXBR rose 3.66 per cent versus a further fall of 0.91 per cent for the DAX. This meant that Brazil outperformed Germany by 4.56 per cent in the period between the fateful semi-final and seeing the trophy handed over to Philipp Lahm.

By the end of trading on Friday, five days after the World Cup ended, Brazil’s MSCI index had outperformed Germany’s DAX by 5.51 per cent since the opening ceremony.

Perhaps it was firing of beleagured Brazil coach Luiz Felipe Scolari.

Of course, German bourse supporters might well point out that it’s too soon to judge the size of any post-tournament rally.

Sentiment and confidence have long been the causal juju invoked by amateur and professional stock-watchers to explain strange equity movements. Kenyes wrote of “animal spirits”, and Nobel Prize winner Robert Schiller of “irrational exuberance”, echoing him. However, since taking home the trophy, the DAX has underperformed the MSCI’s World index by 0.51 per cent as weak German economic data and fears of an escalation of tension in Ukraine, eclipsed the football glow.

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