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.