Every morning in London, it’s the same: amongst the throngs of suited men and women flooding out of the tube stations, you can’t help but notice a light pink bundle tucked under an arm or sticking out of a tote bag. Get a little closer and you’ll see the title, broadly displayed in a classic serif font: FINANCIAL TIMES. Or “FT” for short. This is where anyone and everyone who deals with money gets the inside scoop on market activity, investment performance, and how such things as geopolitical factors and monetary policy can affect them.

Whether you’re a high-power trader at the London Stock Exchange or a retail manager at a high street department store, the Financial Times tells you what you need to know in order to conduct your financial affairs more effectively.

But there’s another place those words are used. It’s called the FTSE 100 Index, and it stands for Financial Times Stock Exchange 100 Index, also known as “Footsie,” which is a share index for the top 100 companies listed on the London Stock Exchange with the highest market cap.

Based in London, the FTSE is one of the key European indices, along with France’s CAC 40 and Germany’s DAX. For this Vestle News article, we’ll focus on the FTSE 100, as it’s seen as a relevant source of info for traders in the UK.

What does the FTSE 100 do?

What it does, essentially, is act as a meter of prosperity for important businesses regulated by UK company law. Think of an index like the FTSE 100 as a pair of binoculars that give traders, as well as anyone interested in the financial workings of both the United Kingdom and Europe as a whole, a sense of the current financial climate.

What affects the performance of the FTSE 100?

A variety of factors can affect the FTSE 100, and thus show up as vital performance indicators. According to Intertrader, here are the top 5 things which could affect the FTSE 100:*

1.            Earnings reports: as stock valuations are also reliant on earnings forecasts, both positive and negative surprise movements can dramatically affect stock price which, in turn, affects the index which tracks it.

2.            Interest rates: equities investment levels and interest rates share an inverted relationship. Often, when the interest rates go up, the investment levels of FTSE 100 component shares go down, mainly due to the increased interest rates indicating decreased corporate profitability and higher interest repayments.

3.            Changes to specific industry sectors: when the market lags in a certain industry, it can drag the index down. The opposite can happen when the industry experiences a boon. For example, the recent tank in oil prices caused a deflation to occur on the UK economy, affecting oil-related sectors such as mining and construction. However, as oil is making a recovery, the oil-related stocks are rising accordingly.

4.            Brexit: you knew this one was coming. As tensions flip flop between alleged deals and no-deal Brexit, the weaknesses in the UK pound and euro show up on the FTSE 100. In February 2019, MarketWatch reported that the FTSE experienced its biggest one-day drop since late 2018, citing Brexit negotiations as a key factor.**

5.            Bank of England’s quarterly inflation report: if inflation targets are met, a hike in interest rates will probably result, which—as you’ve just read—can cause investment levels to drop in the FTSE 100. "

How to invest in the FTSE 100

Trading indices like the FTSE 100 gives traders a way to diversify their market exposure, since the index itself is comprised of a number of different sectors. At Vestle, we offer the ability to invest in the FTSE 100 by trading Contracts for Difference (CFDs), which allow you to take advantage of both the rise or fall of the index, without paying stamp duties. Of course, as with anything market-related, trading CFDs comes with its share of risks, so before you even think about picking up a copy of the Financial Times and trying to spot opportunities in the FTSE 100, acquaint yourself with all risks involved. You can also access recent market info, performance, and the economic calendar of the FTSE 100 on Vestle’s trading platform, giving you a wealth of info on this particular instrument.

By Justin Weinger

The materials contained on this document have been created in cooperation with Vestle UK and should not in any way be construed, either explicitly or implicitly, directly or indirectly, as investment advice, recommendation or suggestion of an investment strategy with respect to a financial instrument, in any manner whatsoever. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 59.5% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Any indication of past performance or simulated past performance included in this document is not a reliable indicator of future results. Full disclaimer: https://www.vestle.co.uk/legal/analysis-disclaimer.html

© 2019 Copyright Justin Weinger - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

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