FTSE 100

About the FTSE 100

The FTSE 100 (Financial Times Stock Exchange 100 Index, pronounced “Footsie”) tracks the 100 largest companies listed on the London Stock Exchange by market capitalization. Launched in January 1984 with a base level of 1,000, the FTSE 100 is the most widely followed UK stock market indicator and one of the most important European equity benchmarks. What makes the FTSE 100 unique among major indices is its strongly international character: approximately 75% of FTSE 100 companies’ revenues come from outside the United Kingdom. The index is heavily weighted toward mining, energy, financial, and consumer staples companies, giving it a distinctly different sector profile from the tech-heavy US indices. This international revenue mix means the FTSE 100 often behaves more like a global cyclical index than a pure UK domestic barometer.

What Moves the FTSE 100?

Commodity Prices

The FTSE 100 has significant exposure to the mining and energy sectors through major components including Shell, BP, Rio Tinto, BHP, Glencore, and Anglo American. Oil prices, industrial metals, and precious metals prices directly impact these heavyweight stocks and, through them, the broader index. Rising commodity prices tend to support the FTSE 100, while commodity declines create headwinds.

GBP Exchange Rate

The FTSE 100 has a well-documented inverse correlation with the British Pound. Because most FTSE 100 companies earn their revenues in foreign currencies (USD, EUR, etc.), a weaker pound boosts the sterling value of those overseas earnings when translated back, supporting the index. Conversely, a strengthening pound can weigh on the FTSE 100 even when global markets are rising. This relationship makes the FTSE 100 a natural hedge for investors exposed to sterling weakness.

Global Economic Growth

Given its international revenue exposure, the FTSE 100 is more sensitive to global GDP growth, world trade volumes, and emerging market demand than to UK-specific economic data. Chinese economic health is particularly relevant due to the mining sector’s exposure to Chinese demand. US economic conditions also matter through the dollar earnings channel.

Bank of England Policy

BoE interest rate decisions impact the financial sector, which represents approximately 20% of the index through major banks (HSBC, Barclays, Lloyds, NatWest) and insurance companies. Rate hikes can boost bank profitability through wider net interest margins while simultaneously increasing borrowing costs for consumers and businesses. UK fiscal policy and government spending decisions also influence domestically focused FTSE 100 components.

Trading the FTSE 100

The FTSE 100 is traded through futures, ETFs (ISF, VUKE), spread bets, options, and CFDs. Regular trading hours are 08:00-16:30 GMT on the London Stock Exchange. The index typically moves 0.5-1.5% per day, with amplified moves around BoE meetings, commodity price shocks, and global risk events. The FTSE 100 opens before US markets, making its early trading sessions responsive to overnight Asian developments and anticipatory of US market direction. It is popular among European traders and those seeking equity exposure with natural commodity and currency diversification.