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Pep Guardiola admitted Manchester City face a major battle to hold on to their title.
Adama Traore struck twice late on as Wolves stunned champions City 2-0 at the Etihad Stadium.
City handed Liverpool an eight-point lead at the top of the Premier League table.
Guardiola admitted his side were “nervous”.
“It’s a lot of points. They haven’t dropped any points, for many circumstances. But it’s better for us not to think that one team is eight points ahead,” said the boss. “It was a bad day. But sometimes it happens. We started quite well, but after we conceded two situations in our build-up, where it’s impossible to defend, we got a little bit nervous.
“We controlled them better in the second half but at the end, with us attacking and people upfront, we lost balls in positions where it’s so difficult and they were clinical. Before that, we hit the post and we had actions, but the way we played was not good. It was not a good day, we didn’t play good.
“It sometimes happens. We spoke about this: ‘Come on guys, a lot of games to play, we did it and we’re going to do it again’. We lost to a good team that was really well-organised, good physicality, strong in the air and so fast on the counter-attack. We knew it.”