Following the coronavirus outbreak across the world, global stock markets have experienced their most significant drop since the 2008 financial crossroad.
With the world’s leading oil producers crashing over the oil output cuts, trading on Wall Street got suspended for some time as investors feared the anticipated global recession linked to the pandemic.
On the other hand, the FTSE 100 index has plummeted to its lowest after the London market dropped to 6%, making it one of its biggest single-day falls since the Black Monday of 1987. According to trading experts, a continued drop will see the UK’s blue-chip index get to lows not experienced since the European sovereign debt crisis.
So, what next for the British economy during and after the coronavirus crisis?
In this guide, you will find details about FTSE trading and an overview of FTSE 100 market shares values.
About Financial Times Stock Exchange (FTSE) 100 Index
FTSE 100 is a UK share index consisting of 100 largest companies as per the listing of the London Stock Exchange (LSE). These companies are classified based on the highest market capitalization, and they come commonly referred to as blue-chip companies.
Market capitalization refers to the size or share value of all the stocks of the listed constituent companies. The blue-chip index gets used as an indicator of the financial performance of the UK’s leading companies, which in turn reflects the health and stability of the country’s economy.
FTSE 100, established in 1984 with an initial value of £1000.
Other FTSE Indices
In addition to FTSE 100, the UK market got defined by two other FTSE indices, including FTSE SmallCap and FTSE 250. The three indices operated by a subsidiary of the LSE known as the FTSE Group.
Just like FTSE 100 FTSE 250 and FTSE SmallCap are weighted on market capitalization.
FTSE 250 consists of the leading companies as per the LSE listing from the 101st to 350th positions. FTSE SmallCap, on the other hand, represents the largest companies in the 351st to 619th positions as per the LSE listing. A combination of FTSE 100 together with the FTSE 250 makes up the FTSE 350 index.
How the Blue-chip Index is Calculated
The calculation of the blue-chip index is done in real-time using the index values and collective market capitalization of the listed constituent companies. The total market capitalization used gets typically influenced by the share values of the blue-chip companies.
Because the prices of company shares keep on changing daily, resulting in changes in the stock index value, due to the changing nature of the blue-chip index, different companies join while others leave the index.
The FTSE Group determines the constituents of the index every quarter, which includes the months of March, June, September, and December.
The Market Shares Values Overview of FTSE 100
Since the outbreak of coronavirus in early 2020, the market share values of FTSE 100 have experienced dynamic disruptions. Here is an overview of how these prices have changed over time during this global pandemic.
- The Sinking of the Blue-Chip Index
The transmission of COVID-19 got confirmed in the UK towards the end of February 2020. And the blue-chip index dropped by 25% in more than 300 points, wiping out up to £469 billion.
As a result, the index shrunk into what is known as the bear market, as share values fall more than 20%.
- FTSE 350 Constituents in a Negative Territory
As the blue-chip index experience one of the most significant one-day drop in history in March 2020, all the constituent companies in FTSE 350 were already within the negative territory.
Some of these companies having shares fall close to 50%. Retail businesses, travel, and oil sectors have suffered losses altogether.
- Travel Fears and Restrictions
Although flights from the UK get not restricted from the US, fears raised by the pandemic have affected the travel sector severely. And companies such as EasyJet and British Airways drop their shares to 7% to 9%.
- Blow in the Oil Industry
As the largest oil companies across the globe crashed over oil prices, companies such as Royal Dutch Shell had their shares slip between 4% and 5%.
- The Sinking of the Dow Jones Index
As the World Health Organization declared coronavirus to be a global pandemic, investors have become quite sceptical about the stability of the worldwide economy. And the US Dow Jones index sink into the bear market territory.
- FTSE 250 Affected
As the world continues to fight the pandemic, the FTSE 250 has also slipped down to 6.1%. Some of the companies that have been affected include British American Tobacco, HSBC Holdings, Lloyds Banking Group, and Taylor Wimpey.
- The Recovery
Although the blue-chip index has been down with hundreds of points, the index has been able to recover losses at some point. Some of the beneficiaries of this recovery include companies such as Morrison Supermarkets PLC.
However, industries such as the travel and currency market sectors continue to suffer misery due to the imposed measures and regulations to curb the pandemic.
Is Now the Right Time to Trade FTSE 100 Shares?
Although the recent trading sessions have shown signs of recovery of the FTSE stock market, the downward trend experienced in the market is likely to continue for some time. However, what is there for the investors?
- Short Term Prospects
The effects of the trending global pandemic can get viewed in two lenses: the short-term and long-term prospects. In the short run, investing in blue-chip shares looks like a terrible idea.
Because, presently, the dynamics of the global economy are unpredictable. For instance, new coronavirus cases and related deaths have continued to rise across the world.
It is forcing governments to impose measures that have a negative economic impact, including lockdowns, curfews, and working-at-home policies.
These effects may take time to be alleviated, which is why this could not be the ideal season for most investors.
- Long Term Prospects
Today, most of the blue-chip stocks get offered with wide safety margins that promise significant scope for future recoveries.
Because most of these stocks are already getting priced against the risks facing the economy, besides, the blue-chip index had a solid reputation for quick recovery after a financial crisis. For some investors, therefore, share dealing now could be a very profitable move.
Disclaimer: This article is not investment advice or an investment recommendation and should not be considered as such. The information above is not an invitation to trade and it does not guarantee or predict future performance. The investor is solely responsible for the risk of their decisions. The analysis and commentary presented do not include any consideration of your personal investment objectives, financial circumstances or needs.
Risk Warning: Our products are traded on margin and carry a high level of risk and it is possible to lose all your capital. These products may not be suitable for everyone and you should ensure that you understand the risks involved.
