FTSE

FTSE (pronounced “footsie”) stands for Financial Times Stock Exchange and refers to a group of benchmark indices that measure the financial performance of companies listed on the London Stock Exchange (LSE).

The most prominent of these is the FTSE 100, which comprises a list of the 100 largest companies on the LSE—“largest” in terms of market capitalisation (calculated by multiplying a company’s share price by its total number of outstanding shares). These companies span a diverse range of sectors including retail, energy, pharmaceuticals and banking, amongst others.

Given the dynamic nature of financial markets and company valuations, the index undergoes a quarterly review to ensure it accurately reflects the current largest publicly traded companies. During these reviews, firms with rising market capitalisation may be added to the index, while others may be demoted if they fall below the threshold. Because the FTSE 100 is a weighted index, companies with greater market value exert more influence on its overall movement. This means that the price fluctuations of larger firms—such as Shell or HSBC—can significantly sway the index, compared to smaller constituents.

Beyond the FTSE 100, there are several other indices under the FTSE umbrella. These include the FTSE 250 (mid-sized companies), FTSE 350 (a combination of the FTSE 100 and FTSE 250), and the FTSE All-Share.

The FTSE plays a pivotal role in the UK’s financial ecosystem, serving as a key indicator of corporate health and market sentiment. While the FTSE 100 reflects the performance of the UK’s largest and most influential firms—many of which operate globally—it also acts as a barometer for broader economic trends and investor confidence. Institutional investors and fund managers monitor the FTSE indices closely to gauge economic trends and seek investment opportunities. 

Although it doesn’t capture every facet of the UK economy, the FTSE remains a powerful tool for anyone looking to understand the landscape of current British financial markets.