Measuring the Economy
A stock market index measures the price performance of a defined group of shares, providing a single figure that represents the collective direction of an entire market, region, or sector. Rather than tracking individual companies, indices offer a broader view of economic health and investor sentiment.
Index trading allows you to take a position on the direction of an entire market without selecting individual stocks. When you trade an index, you gain exposure to all the companies it contains through a single instrument — making it one of the most efficient ways to express a view on a national economy, a sector, or a global trend.
For UK-based traders, the FTSE 100 is the natural starting point. Comprising the 100 largest companies by market capitalisation listed on the London Stock Exchange, it serves as the primary benchmark for the health of the UK equity market. But opportunity extends far beyond London — from the technology-heavy NASDAQ 100 in the US to the DAX 40 in Germany and the Nikkei 225 in Japan.
What Are Indices?
An index is a statistical measure that tracks the price performance of a selected group of stocks listed on a particular exchange. Each index follows a specific methodology — selecting its constituents by criteria such as market capitalisation, sector, or geography, and weighting them according to a defined formula.
The most widely used weighting method is market-capitalisation weighting, where larger companies have a greater influence on the index's value. The FTSE 100, S&P 500, and DAX 40 all use this approach. In contrast, price-weighted indices such as the Dow Jones Industrial Average and Nikkei 225 give more influence to stocks with higher share prices, regardless of company size.
Understanding how an index is weighted matters because it determines which companies drive day-to-day price movements. In a market-cap-weighted index like the S&P 500, a handful of mega-cap technology stocks can account for a significant share of the index's total movement. In a price-weighted index, a single high-priced stock can shift the overall reading without necessarily reflecting broader market conditions.
Market-Cap Weighted
Components are weighted by total market value. Larger companies carry greater influence. This is the most common methodology and is used by the majority of global benchmark indices.
Price Weighted
Components are weighted by share price alone. Stocks with higher prices have a greater impact on the index, regardless of the company's total market capitalisation.
Indices Available on Aevergreen
Aevergreen provides access to a comprehensive range of global indices, covering major economies across Europe, the Americas, and Asia-Pacific. Each index reflects the performance of a distinct market or sector.
| Index | Market | Description |
|---|---|---|
| FTSE 100 | United Kingdom | 100 largest companies on the London Stock Exchange |
| S&P 500 | United States | 500 leading US large-cap companies by market value |
| Dow Jones | United States | 30 prominent US blue-chip companies, price-weighted |
| NASDAQ 100 | United States | 100 largest non-financial companies on the NASDAQ exchange |
| DAX 40 | Germany | 40 largest companies on the Frankfurt Stock Exchange |
| CAC 40 | France | 40 most significant companies on the Euronext Paris |
| STOXX 50 | Eurozone | 50 leading blue-chip companies across Eurozone nations |
| IBEX 35 | Spain | 35 most liquid stocks on the Bolsa de Madrid |
| SMI | Switzerland | 20 largest and most liquid stocks on the SIX Swiss Exchange |
| AEX 25 | Netherlands | 25 largest companies on the Amsterdam Stock Exchange |
| OMX 30 | Sweden | 30 most traded stocks on the Stockholm Stock Exchange |
| Nikkei 225 | Japan | 225 leading companies on the Tokyo Stock Exchange |
| ASX 200 | Australia | 200 largest companies on the Australian Securities Exchange |
| TSX Composite | Canada | Canada's primary benchmark index on the Toronto exchange |
Why Trade Indices with Aevergreen
Index trading offers a distinct set of advantages for traders seeking broad market exposure without the complexity of managing individual stock positions.
Broad Market Exposure
A single index position gives you exposure to dozens or hundreds of companies, diversifying risk that would otherwise concentrate in one stock.
Sector & Economy Views
Express a directional view on an entire economy — bullish on US tech? Trade the NASDAQ 100. Bearish on European banks? Take a position on the STOXX 50.
High Liquidity
Major indices are among the most heavily traded instruments in the world, ensuring tight spreads and reliable execution during active sessions.
Extended Trading Hours
Access index markets across multiple time zones — from the Asian open through the London and New York sessions, five days a week.
What Moves Index Prices
Because indices aggregate the performance of many companies, their price movements reflect broader economic and market forces rather than individual corporate events.
Macroeconomic data is the primary driver. GDP growth, inflation readings, employment reports, and manufacturing output shape expectations about economic health. A strong jobs report in the US, for example, can lift the S&P 500, while weaker-than-expected UK inflation data may weigh on the FTSE 100.
Central bank policy has a direct impact on equity valuations. Interest rate decisions from the Bank of England, the Federal Reserve, the ECB, and the Bank of Japan influence the cost of borrowing, corporate profitability, and the relative attractiveness of equities versus bonds. Forward guidance from central bankers can move indices even before rates change.
Earnings season creates concentrated periods of index volatility. When major constituents — particularly high-weight stocks like AstraZeneca in the FTSE 100 or Apple and Microsoft in the S&P 500 — report results, their individual moves can shift the entire index.
Geopolitical events and sentiment drive risk-on or risk-off flows across global indices. Trade policy announcements, elections, and international tensions can cause correlated moves across multiple markets simultaneously. In risk-off environments, indices tend to fall as capital rotates into perceived safe havens such as government bonds, gold, and defensive currencies.
Important note: Spreads, margin rates, and trading conditions vary by index and may differ by jurisdiction. At Aevergreen, our team is committed to providing competitive conditions and robust risk management across all available indices.
