The FTSE 100 index is one of the most prominent benchmarks for the UK stock market. It tracks the performance of the 100 largest companies listed on the London Stock Exchange based on market capitalisation. These firms are considered the major players in the country’s financial and business landscape and are often referred to as blue-chip companies due to their established reputation, consistent performance history, and global operations.
Composition and Criteria
The index was introduced in 1984 and is maintained by FTSE Russell, a subsidiary of the London Stock Exchange Group. To qualify for inclusion, a company must meet specific criteria related to market value and liquidity. The constituents are reviewed quarterly, allowing for an updated representation of the UK's economic environment.
The FTSE 100 primarily includes large-cap stocks from sectors such as energy, finance, pharmaceuticals, telecommunications, and consumer goods. Many of these firms have significant international exposure, and their revenues often reflect a combination of domestic and global performance. As a result, the index is sensitive not only to domestic economic changes but also to global market shifts and geopolitical trends.
Role in the Broader Market
The presence of the FTSE 100 index within the broader spectrum of UK equities provides a snapshot of how major corporations are performing. Since it includes a wide variety of industries, it helps gauge the general mood of the UK stock market. However, due to the global nature of many constituent firms, its movement does not always mirror the internal state of the UK economy.
The index often acts as a headline indicator for financial news coverage and institutional tracking. Its performance is widely followed by those examining corporate growth patterns, earnings reports, and macroeconomic conditions.
Sector Representation
Among the top sectors represented in the index are financial services, oil and gas, healthcare, mining, and consumer staples. These sectors have historically maintained a strong presence, but shifts in market capitalisation can lead to the entrance or exit of individual companies during the scheduled rebalancing periods.
Each constituent carries a weighting based on its market size, so larger firms influence the index more than smaller ones. This proportional method ensures that substantial market movements from a major company are reflected accurately.
International Exposure and Currency Impact
A notable characteristic of the FTSE 100 index is its heavy international exposure. A large portion of the revenue generated by its components comes from outside the United Kingdom. This feature makes the index responsive to exchange rate fluctuations, particularly those involving the British pound.
A weaker pound may support companies with overseas earnings when converted back to sterling, whereas a stronger pound might present headwinds for exporters. As such, foreign currency dynamics can play a significant role in daily movements.