In much the same way that The Dow and The S&P 500 cover the US market, these three indexes cover three major markets in Europe. The FTSE 100 indexes the UK market. The DAX covers the German market. And the CAC 40 covers the French market.
What Is The FTSE 100?
The FTSE company is jointly owned by The Financial Times and the London Stock Exchange. This is where the name comes from. The index tracks the performance of the largest 100 companies in the UK.
The FTSE 100 Fact Sheet states:
“The FTSE 100 is a market-capitalisation weighted index representing the performance of the 100 largest UK-domiciled blue chip companies, which pass screening for size and liquidity. The index represents approximately 84.35% of the UK’s market capitalisation and is suitable as the basis for investment products, such as funds, derivatives and exchange-traded funds. … FTSE 100 constituents are all traded on the London Stock Exchange’s SETS trading system.”
From the fact sheet, I found it interesting that 4 of the top 10 constituents in the FTSE 100 are “Oil & Gas Producers”. Oil and gas are 40% of the top 10. I am not sure if that is meaningful but I found it interesting.
What Is The DAX?
The DAX index represents the 30 largest companies in the German stock market. The Deutsche Börse website says the DAX “Measures the development of the 30 largest and best-performing companies on the German equities market and represents around 80% of the market capital authorized in Germany”
The DAX seems to be a well diversified index of German based companies. It is not just based on the largest companies but tries to represent the best-performing members of the market. The website says it is “Completely rule-based and transparent.”
What Is The CAC 40?
The CAC 40 is the most broadly used index to track the French stock market. The NYSE Euronext site states: “The CAC 40 index is the main benchmark for Euronext Paris. Tracking a sample of Blue Chip stocks, its performance is closely correlated to that of the market as a whole. The index contains 40 stocks selected among the top 100 market capitalisation and the most active stocks listed on Euronext Paris, and is the underlying asset for options and futures contracts. The base value is 1,000 at December 31, 1987.”
The CAC 40 pulls a diversified sampling of 40 companies from the largest 100 companies on the Paris stock exchange.
So that is a brief overview of the major European Stock Market Indexes. These are great to watch when you want to know what is going on across the pond.