Former Liverpool boss Graeme Souness has insisted the Reds remain in pole position in the Premier League title race despite their first defeat of the season by rivals Manchester City.

Leroy Sane's goal at the Etihad Stadium on Thursday evening clinched a 2-1 victory for the hosts and reduced Liverpool's lead at the top of the table to four points on a night when they could have gone 10 clear.

However, Sky Sports pundit Souness was adamant there was no need for gloom on the red half of Merseyside as Pep Guardiola celebrated and Jurgen Klopp licked his wounds.

He said: "Liverpool are in great shape. Ask both managers what position you'd rather be in right now – you're going to take the four points sitting top of the league, especially with the run-in that Liverpool have."

Souness' view was backed by ex-Liverpool defender Jamie Carragher.

Carragher added: "Going into this game, the talk was 'Liverpool could go 10 points clear', a lot of the talk was Liverpool, Liverpool.

"A lot of the talk over the next few days in the press will be Man City, 'Man City are back in the race and they are now favourites to win the league'.

"Liverpool need to just take their medicine, just relax, calm down, play the FA Cup game whatever happens, whatever team he picks, but then I think it's Brighton that Liverpool play next...

"Four points clear is still a really good position to be in and the form they have shown, certainly against sides outside the top six, they have got a lot of those games coming.

"Liverpool just need to relax, get some wins under their belt, maybe improve that lead if they can over the next month to six weeks, but they're in a fantastic position."

Former Manchester United defender Gary Neville, however, saw City's victory and in particular the manner of it, as a sign of champion quality.

Neville said: "To beat Liverpool is tough and to put a performance like that in when you most need it is a sign of a champion team.

"They have struggled in this last few weeks; they have re-established a bit of authority tonight. Obviously it doesn't determine the outcome of the title, but there was a desperation in this stadium tonight.

"I have never seen this stadium have an atmosphere like this. I have not been to every game, as you can imagine, over the last 25 years, but it is the best I have ever seen the atmosphere.

"From minute one, they never let go the whole game. There was a five-minute period after Liverpool scored, but they responded and Bernardo Silva, Fernandinho... They were unreal, actually, in central midfield.

"Their tackling, their running, it was fantastic. They were desperate to win."

Souness too was impressed by Brazilian midfielder Fernandinho, adding: "Fernandinho is easily the best central midfield player in our country right now, and the amount of work he gets through is overlooked by the technique he has got as well.

"When he wins it, puts a tackle in and gets his head up, he generally makes the best pass that's on offer."