It looks like Manchester United and Arsenal are both about to be dealt a transfer setback with the news that Matheus Cunha is close to signing a lucrative new contract at Wolves.

The 25-year-old Brazilian has been one of the few shining lights in a poor season for Wolves so far, but which has shown signs of life since Vitor Pereira replaced Gary O’Neil as boss last month.

Both Arsenal and United have been linked with moves for Cunha in the build-up to the January transfer window, but Wolves have moved to tie down their star of the season by offering him a long-term extension at Molineux.

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The Telegraph reports: “Cunha and his representatives are in advanced talks over a new deal and it is expected that the Brazilian forward will officially commit his future to Wolves within the next two weeks.

“It is understood the new terms could include a release clause that will only become active if Wolves are relegated from the Premier League, but details of the contract are yet to be fully completed."

Pereira is unbeaten since taking charge at Molineux, and his next big test comes on Monday when Wolves host high-flying Nottingham Forest (8pm kick-off). In that time he has hauled Wanderers out of the bottom three and given fans hope that relegation may yet be avoided.

The Telegraph adds: “Arsenal have shown some interest in signing Cunha, who has scored 10 goals and delivered four assists in the Premier League so far this season. However, Wolves never had any fears over a sale this month and have been close to an agreement with Cunha for a few weeks now.”

United have also been tipped as a destination for Cunha as Ruben Amorim sets about reviving the ailing giants - especially after the forward appeared to like a social media post that suggested he would move to Old Trafford.

Cunha will not be involved against Forest after he was banned during a confrontation with an Ipswich staff member following O’Neil’s final game in charge.

However, Reims centre-back Emmanuel Agbadou is likely to be at Molineux for the game ahead of a £15m move to the Premier League. The Ivory Coast international is understood to be in England for a medical ahead of becoming Pereira’s first signing for the club, barring any last-minute problems.