World Cup and World CPI Are Heating Up, Risking Mistakes by Key Players

June 23rd Weekly Market Update

About a week into the World Cup the average number of goals scored per match is 2.92, putting the tournament on course to become the highest scoring World Cup since 1970 in Mexico (2.97). The greater number of goals is being blamed in part on hotter weather. Unlike the cold winter weather of South Africa, site of the 2010 World Cup, which produced the second lowest scoring tournament, the matches in Brazil have seen temperatures around 80 degrees. The heat and humidity can result in players getting fatigued more quickly and making mistakes. This may lead to a rising trend in average goals scored in the years ahead with Russia hosting the World Cup in 2018 (including a stadium in Sochi where it was too hot for the Winter Olympics and which is typically in the 80s at this time of year) and Qatar hosting in 2022, where the high temperature in Doha gets into the 100s this time of year.

Just as the World Cup has been heating up, increasing the risk of player mistakes, the world consumer price index (CPI) has also been heating up, complicating the task for policymakers at the world’s central banks and increasing the risk of mistakes that could have market implications. World CPI has tracked the average number of goals scored at the World Cup and both may be headed higher.

The conflict in Iraq is contributing to the rise in inflation through higher oil prices. Oil prices are at nine-month highs, rising above $107 a barrel on Friday, as the threat increased of a material supply disruption due to the rapid advance of militants in Iraq, the second-largest OPEC oil producer. We see a major disruption as unlikely given where the conflict is concentrated and the distribution of oil production in Iraq. Nevertheless, prices may remain elevated and creep toward the $113 per barrel seen in 2011, when the Libyan conflict negatively impacted global oil supply.

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