International stock markets uncovered: What is the FTSE 100?

Julie Brownlee, Fsp Invest, 25 Aug. 2014

Tags: ftse 100, what is the ftse 100, london stock exchange, companies in the ftse 100, value of the ftse 100



If you watch the financial news of the TV or check on the performance of the stock markets online, you’ll come across the FTSE 100.

So what exactly is the FTSE 100?

Let’s take a closer look…



What is the FTSE 100?


The FTSE 100 is the index of the top 100 stocks listed on the London Stock Exchange. The companies on the FTSE 100 are the biggest by market capitalisation on the London Stock Exchange.

So out of the 2,469 stocks listed on the exchange, they are the top 100.

Looking at the London Stock Market as a whole, the entire market capitalisation is around £4.123 trillion. The FTSE 100’s market capitalisation is £1.699 trillion.


What makes up the FTSE 100?


The FTSE 100 is a very global index, the team of experts at Money Week explain. The companies listed on the index make around 70% of their combined sales internationally.

Have a look at the chart below. It shows you the different sectors the companies fall into.


Sectors of the FTSE 100


Banks and insurance companies (‘financials’) makes up the biggest sector on the FTSE 100, accounting for around a fifth of its market value.

Comparing the FTSE 100 to other developed markets, it has a very heavy commodity weighting in comparison.

These companies specialise in ‘oil and gas,’ and different mining (‘basic materials’) activities. They account for about 30% of the FTSE 100.

Classic defensive stocks make up nearly 20% of the index. These are consumer goods, which include household goods, and food and drink companies; and healthcare companies.


The effect of the pound on the FTSE 100


As the companies on the FTSE 100 make such a large amount of their income overseas, the performance of the pound has a large bearing on the performance of their dividends and profits.

At the moment, the pound is strong. It’s at a six-year high to the dollar. This is impacting dividend payments to investors.

So there you have it, what the FTSE 100 is.

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