Why is the FTSE 100 falling?

The FTSE 100 is closer to a commodity and currency index with a London listing than a barometer of Britain. Here's what actually moves it, why it sometimes rises on bad UK news, and what a falling index does and doesn't tell you about the companies inside it.

By Nathan Wickham-Hurd · Founder, Oak Growth · First-class Economics & Finance, MBA · Last reviewed August 2026

The FTSE 100 is not the UK economy

This is the thing most explanations skip. The index is dominated by companies that happen to be listed in London while earning the majority of their revenue overseas — oil and mining groups, global banks, pharmaceutical companies, consumer goods multinationals. A large share of its earnings arrives in dollars.

The practical consequence: the FTSE 100 frequently moves for reasons that have nothing to do with Britain, and sometimes moves opposite to UK news. It is closer to a commodity and currency index with a London listing than a barometer of the domestic economy.

The five things that actually move it

The oil price

Energy majors are among the largest constituents. When crude falls sharply, the index feels it directly regardless of what the rest of the market is doing.

Metals and mining

The index carries unusually heavy mining exposure for a developed market, which makes it sensitive to Chinese industrial demand in a way most indices aren't.

Sterling

Because so much revenue is earned abroad, a stronger pound mechanically reduces the sterling value of overseas earnings. This is why the index has often risen on bad UK news that weakened the currency — a relationship that confuses people every time.

Interest rate expectations

Higher expected rates reduce the present value of future cash flows across every holding, and separately squeeze the demand outlook. See stocks and rising interest rates.

Global risk sentiment

When large investors reduce equity exposure worldwide, they sell everything, including companies with unchanged prospects. The FTSE goes with it.

Falling index, unchanged businesses

An index level is a weighted average of a hundred share prices. It tells you nothing about whether any particular company is now cheap. A fall driven by the oil price says something real about energy majors and almost nothing about a pharmaceutical business in the same index.

Index down 3% ≠ every company worth 3% less Index down 3% = the weighted average price fell

The useful move during a fall is to stop looking at the index and start looking at individual companies: what each one earns, whether that has changed, and what it is worth against today's price. That's the whole of finding value stocks.

The FTSE 250 tells a different story

If you actually want a read on the UK economy, the mid-cap index is the better indicator. Its constituents earn far more of their revenue domestically, so it responds to UK rates, wages and consumer confidence in a way the FTSE 100 doesn't. When the two indices diverge sharply, that gap usually is the story — see undervalued FTSE 250 stocks.

A falling index is not a reason to buy or to sell. It's a reason to check whether the earnings power of the businesses you own has changed — and usually it hasn't, in which case the only thing that moved was the price.

Look past the index level

Oak Growth covers the FTSE 100 and 145 FTSE 250 companies alongside seven more markets, with an estimated intrinsic value and margin of safety for each.

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Common questions

Why is the FTSE 100 falling?

Most often the oil price, metals and mining demand, a stronger pound reducing the sterling value of overseas earnings, higher interest rate expectations, or global investors reducing equity exposure. Because most FTSE 100 revenue is earned abroad, the cause frequently has nothing to do with the UK economy.

Does the FTSE 100 reflect the UK economy?

Not closely. Its largest constituents are global oil, mining, banking, pharmaceutical and consumer companies earning the majority of their revenue overseas. The FTSE 250 is far more domestically exposed and gives a better read on UK economic conditions.

Why does the FTSE 100 rise when the pound falls?

Because a large share of constituent earnings is generated in foreign currency. When sterling weakens, those overseas earnings convert into more pounds, which raises reported profits and often the index — even when the news weakening the pound is bad for Britain.

Should I buy when the FTSE 100 falls?

An index level tells you nothing about whether any individual company is cheap, since a fall driven by one sector says little about the rest. The useful step is to check whether the earnings power of specific businesses has changed and what each is worth against its current price.

Also see: Undervalued FTSE 100 stocks → · Undervalued FTSE 250 stocks → · Why is the stock market falling? →