UK100 – Trade the UK100
The UK100 – or Financial Times Stock Exchange (FTSE) 100 – is one of the most popular stock market indices in the world for traders. The liquidity and volatility of the UK100 index allows it to present traders with dynamic opportunities for speculating on the UK100 price with contracts for difference (CFDs), without owning any underlying assets.
What is the UK100 index?
The UK100 index is a capitalisation-weighted share index that comprises 100 companies listed on the London Stock Exchange with the largest full market value. Founded in 1984, the UK100 index has since superseded the FT30 index as the foremost benchmark of UK equity.
For traders, the UK100 index can provide an insight into the health of the wider UK economy – representing around 80% of the value of the UK market on the London Stock Exchange. There is also an intricate relationship between the UK100/GBP for prospective traders to be aware of.
How does the UK100 index work?
Trading on the UK100 index is open on week days between 8am until closing values are issued at 4.30pm. During these hours, the index is calculated in real time and updated every second – making it an extremely liquid market index in which traders can long or short their position(s).
With many of the listed companies earning from overseas business/operations, the UK100/GBP relationship is often inverted. If GBP sterling weakens on the currency markets, the UK100 can often strengthen due to the increased profitability of revenues earned overseas e.g. in USD.
What drives the UK100 price?
Factors that can impact and drive the UK100 price are varied, and can include:
− The weightings of individual companies listed on the UK100 index
− UK economic performance, as well as other closely aligned economies e.g. eurozone
− UK government fiscal policy
− Bank of England interest rates and inflation reports
The real-time UK100 chart on this page can provide prospective and current traders with the ability to spot existing trends in this fluid stock market – and opportunities for strengthening their position. Updated to reflect the most current UK100 conditions, this chart should not be used as a guarantee for future performance – but is available to traders around the world.
UK 100 – Q3 2020 Outlook
The UK economy seems to be ending Q2 2020 on a sombre note. Figures released by the Office for National Statistics on June 19, stated that the country’s borrowing levels reached £103.2 billion in April and May. Public debt is now larger than the size of the UK economy (at 100.9% of the GDP), for the first time since 1963.
Jobless claims rose by over half a million in May 2020, while the claimant count increased 126% from March to May. The Bank of England has increased its QE program by £100 billion but remained pessimistic in its outlook on an economic recovery in 2020.
The UK 100 or the FTSE 100 has been extremely volatile and subdued in Q2. Recovery has been minimal, due to continued oil price volatility, increased fears of a second wave of the coronavirus pandemic and the global slowdown. Dismal data from the Eurozone has also contributed to volatility, such as collapse of German exports and weakness in prominent European sectors of travel, banks, construction and automobile.
A rise in COVID-19 cases in the US and China could be a major risk factor for the FTSE 100. Lower demand for oil in China, due to further lockdowns, could hit oil prices and major stocks on the index. The index has contracted 17.3% since the start of 2020. By Q3, the contraction could be as high as 18%-19%.
Economic Data to Watch Out for in Q3 2020
July 2, 2020/ August 7, 2020/ September 4, 2020: US Non-Farm Payrolls Report
The US unexpectedly added 2.5 million jobs in May, with the unemployment rate standing at 13.3%. The economy is expected to add another 1.5 to 2 million jobs in June 2020. Lower than expected job growth can impact the US Dollar and thereby US-facing companies trading on the UK FTSE 100.
July 9, 2020/ August 7, 2020/ September 8, 2020: German Balance of Trade
German exports slid 24%, while imports declined 16.5% in April 2020. Trade surplus shrank €3.2 billion, leading to a 1.4% decline in the FTSE 100. Further declines are expected for May and June, which will induce volatility in the index.
July 14, 2020/ August 10, 2020/ September 10, 2020: UK Balance of Trade
Trade surplus of £0.30 billion was recorded in April 2020, with exports falling at a 10-year low of 19.3%. The trade surplus is expected at £6.8 billion for Q2, which might shrink to £2.2 billion in Q3.
July 16, 2020/ August 11, 2020/ September 15, 2020: UK Claimant Count Change
Over 2.8 million people have filed for unemployment benefits as of May 2020. An additional 528K people are expected to file for unemployment in June.
July 29, 2020/ September 16, 2020: Interest Rate Decision by US Fed
The US Federal Reserve intends to keep its federal funds rate at 0%-0.25% till 2021. Any change in their monetary policy could lead to further weakening of the US Dollar and a decline in the UK 100.
July 31, 2020/ August 14, 2020/ September 8, 2020: Euro GDP Growth Rate QoQ
The Eurozone economy shrank 3.6% in Q1. It is expected to contract a further 12.5% in Q2.
Q3 2020 Predictions: Political Events That Could Impact the UK 100
Brexit developments will weigh on UK businesses. By the end of June, Prime Minister Boris Johnson will have to decide whether the transition period will need to be extended. Talks have not progressed much, due to the pandemic and both sides continue to be at loggerheads over critical issues. UK businesses could be asked to prepare for a no-deal Brexit, which could hit stocks hard.