What is the FTSE 100?

The FTSE 100 (pronounced "footsie one hundred") is the United Kingdom's most closely watched equity index. Launched in January 1984 with a base value of 1,000 points, it measures the aggregate performance of the 100 companies with the highest market capitalisation listed on the London Stock Exchange (LSE).

Constituents are reviewed quarterly by FTSE Russell. A company must meet minimum liquidity and free-float requirements to qualify, and the index is weighted by free-float market capitalisation, so the largest businesses have the greatest influence on day-to-day moves. Sectors such as energy, mining, financials, and consumer staples tend to dominate because the LSE lists several of the world's largest multinationals in these industries.

One important nuance is that the FTSE 100 is a global earnings index dressed in a UK listing. Many of its constituent companies earn the majority of their revenues outside the United Kingdom — in the United States, emerging markets, or commodities markets priced in US dollars. This means the index often moves inversely to sterling: when the pound weakens, foreign earnings translate back into more pounds, which pushes the index up even if the domestic economy is under stress.

Investors use the FTSE 100 as a barometer of large-cap British (and internationally-exposed) corporate health, as a benchmark for UK equity funds, and as the underlying reference for derivatives, ETFs, and structured products. The index level, combined with the gap between FTSE 100 and FTSE 250 performance, can reveal whether markets are favouring globally-diversified large caps or domestically-oriented mid-caps.

The FTSE 100 does not include dividends in its headline figure; the FTSE 100 Total Return Index (which reinvests dividends) gives a truer picture of long-run wealth creation. When analysts discuss "the market" in the UK context, they almost always mean the FTSE 100.