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FTSE 100 Index (UK100 CFD)

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Axi Symbol: UK100

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The Financing Reference Rate: BOE Base Rate

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3 Day Financing: Friday

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Pricing is indicative. Past performance is not a reliable indicator of future results. Client sentiment is provided for general information only, is historical in nature and is not intended to provide any form of trading or investment advice - it must not form the basis of your trading or investment decisions.

What is the FTSE 100 index?

The FTSE 100 index, often referred to as the "Footsie 100," is a stock market index that represents the performance of the 100 largest publicly traded companies listed on the London Stock Exchange (LSE). Developed by the Financial Times Stock Exchange (FTSE) Russell, it is one of the most widely recognised and influential stock market indices in the United Kingdom.

The FTSE 100 index serves as a benchmark for the overall performance of the British stock market. It measures the price movements of the 100 companies with the highest market capitalisation on the LSE.

The index is weighted by market capitalisation, meaning that companies with higher market values have a greater impact on the index's movements. This ensures that larger companies have a more influence on the index compared to smaller ones. However, the weight of any single company in the index is limited to prevent excessive dominance by one company.

The FTSE 100 index is considered a broad representation of the UK economy and includes companies from various sectors, such as finance, energy, healthcare, telecommunications, and consumer goods. Well-known companies on the FTSE 100 include Barclays, British American Tobacco, Burberry, BAE Systems, Lloyds, Rolls-Royce, Unilever, and Vodafone.

When the FTSE 100 index rises, it indicates that the overall value of the stock market has increased, whereas a decline in the index suggests a decrease in market value. In that way, it provides traders, investors, analysts, and economists with a snapshot of the overall health and performance of the British stock market.

It is important to note that while the FTSE 100 index represents the largest companies in the UK, it does not reflect the performance of the entire stock market or the overall economy. Other FTSE indices, such as the FTSE 250 (mid-cap companies) and the FTSE All-Share (broader market representation), provide the opportunity for additional analysis of the UK stock market.

FTSE 100 historical performance

The FTSE 100, established in 1984 through a collaboration between the Financial Times and the London Stock Exchange, swiftly emerged as the premier benchmark for the UK stock market. It experienced substantial growth during the 1980s, capitalising on the robustness of the UK economy and London's ascendance as a pivotal financial hub.

On October 19, 1987, the FTSE 100 suffered a dramatic plunge, etching its name into history as "Black Monday". This event saw the index shed over 10% of its value within a single day.

Nevertheless, the FTSE 100 embarked on a renewed upward trajectory, spearheading a significant bull market throughout the 1990s, only to face a setback with the bursting of the dot-com bubble in the early 2000s.

After that, the index started to recover in 2003, but the Global Financial Crisis again rattled it in 2009. The FTSE 100 eventually recovered, but the following decade, the 2010s, was characterized by ongoing political uncertainty due to the UK's exit from the European Union.

What affects the price of the FTSE 100 index?

A wide range of factors that affect the individual stock prices of its constituent companies have an impact on the price of the FTSE 100 index. Here are some key things that can cause the price of the FTSE 100 index to change:

  • Company earnings: The financial performance of the individual companies included in the index is a major driver of the index's movement. Earnings reports, indicating higher or lower profits or revenue, can alter investor confidence and push the index price up or down.
  • Macroeconomic factors: Important economic indicators, such as Gross Domestic Product (GDP) growth, inflation rates, interest rates, and unemployment numbers, can impact the overall sentiment of the market and, subsequently, the index. Positive economic data can boost investor confidence and drive the index higher, while negative economic news can have the opposite effect.
  • Global market conditions: International events and global market trends can have an impact on the FTSE 100 index. Factors such as geopolitical developments, trade tensions, global economic indicators, and the performance of major international stock markets can impact investor sentiment and, consequently, the index's price.
  • Investor sentiment and psychology of the market: The perception that traders, investors, and other market participants have of the overall market and their confidence in prospects can influence the index. Positive sentiment, driven by optimism and a willingness to invest, tends to push the index upward, while negative sentiment, driven by fear or uncertainty, can result in a decline.
  • Currency fluctuations: The FTSE 100 index is denominated in British pounds (GBP), and currency fluctuations can impact the index's value. If the value of the GBP strengthens against other currencies, it can lead to an increase in the index, as the value of the constituent companies' international earnings is effectively higher when converted back into GBP.
  • Sector news: Developments specific to certain sectors or industries represented in the index can affect its price. Positive news, such as breakthroughs in a specific sector, new regulations, or significant deals, can influence investor sentiment toward the index as a whole.
  • FTSE company news: Noteworthy events such as mergers and acquisitions, management changes, product launches, regulatory actions, and major contracts can influence stock prices and subsequently affect the index.

What to watch out for when trading the FTSE 100 index?

When trading the FTSE 100 index, it is important to keep track of key events and announcements that can significantly impact individual stock prices and, therefore, the index collectively. Here are some notable events to be aware of:

  • Corporate earnings reports from FTSE 100 companies, such as Barclays, British American Tobacco, Lloyds, Rolls-Royce, and Unilever
  • Corporate earnings from listed companies including ASML Holding, LVMH, Total Energies, SAP, and Siemens
  • Bank of England (BoE) monetary policy decisions
  • British GDP figures
  • UK interest rate announcements
  • UK manufacturing Purchasing Managers' Index (PMI) and retail sales data
  • UK Trade Balance and import/export figures
The data is sourced from third-party providers. This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice.

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