FTSE 100

The FTSE 100 is Britain's 'blue-chip' stock index.But its makeup means it is more of a global index than a snapshot of UK plc.

The FTSE 100, often referred to as the "Footsie", is a stockmarket index that measures the performance of the shares of the 100 largest companies by market value listed on the London Stock Exchange. The FTSE 100 is often called the "blue chip" index as the companies are meant to represent the biggest and best of their kind the former adjective is true, the latter not necessarily so.

By the standards of other developed world stockmarkets, the FTSE 100 is unusually skewed towards the resources sector: oil and gas groups and miners collectively make up just over a fifth of the index. This helps to explain why it has trailed the performance of many of its major counterparts in recent years.

Note, too, that many of the UK's biggest companies are internationally focused (which is more typical for a big stockmarket index). Around 70% of the FTSE 100 companies' revenue is derived from abroad. That makes movements in the FTSE 100 a fairly weak indicator of how UK businesses and the economy are faring and also leaves it quite heavily exposed to currency fluctuations, particularly changes in the value of the US dollar.

A better measure of the health of UK-focused businesses is the FTSE 250, an index which lists the next-biggest 250 companies by market value, and which contains a smaller proportion of international companies.

The FTSE 100 was first created in 1983, when it had an index value of 1,000. It replaced the FT index. The index is calculated by FTSE Group, an independent company originally created by the London Stock Exchange and Pearson, then-owner of the Financial Times. The company calculates thousands of other indices a day, including the FTSE All Share, which is made up of the prices of every listed London share.

Recommended

Why you should own UK stocks – and what to buy
Stockmarkets

Why you should own UK stocks – and what to buy

The UK’s stockmarkets are unusually cheap compared with the rest of the world. If you don’t have substantial holdings in UK stocks, you should, says M…
16 Dec 2019
Modern monetary theory (MMT)
Glossary

Modern monetary theory (MMT)

Modern Monetary theory, or MMT, has become popular on the left, both in the UK and abroad. (Wags say that it stands for "magic money tree".) 
21 Sep 2020
Price to sales ratio
Glossary

Price to sales ratio

A company's market cap divided by the company's annual sales (or revenue) gives us the price/sales ratio.
28 Aug 2020
Too embarrassed to ask: what is a p/e ratio?
Too embarrassed to ask

Too embarrassed to ask: what is a p/e ratio?

Find out how to use the price/earnings ratio (p/e ratio for short) – a useful starting place for investors looking to value a company.
26 Aug 2020

Most Popular

Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020
UK post-Covid recovery stocks: these 20 companies could be set to rocket
Share tips

UK post-Covid recovery stocks: these 20 companies could be set to rocket

Finding stocks with the potential to rise tenfold or even further is far easier said than done. But the pandemic has produced the most promising backd…
22 Oct 2020
Big spending government is here to stay – just ask Rishi Sunak
UK Economy

Big spending government is here to stay – just ask Rishi Sunak

Governments around the world are splashing huge amounts of cash as they do “whatever it takes” to prop up their economies. John Stepek looks at where …
23 Oct 2020