I have been asked by several people this month why the FTSE100 is reacting so badly to the news coming out of China when the UK economy is doing so well.

The simple answer is that the FTSE100 is more a barometer of the world economy rather than the UK economy. This is because the largest 100 UK companies that make up that index are global companies.

A better feel for how the UK is doing comes from the mid-cap FTSE250 index which is also far better diversified than the FTSE100, representing a broader range of sectors. Many people, me included, believe that the media should adopt ether the FTSE250 or the FTSE All Share index as the headline index rather than use the FTSE100.

IMPORTANT, please read this: Nothing I write here represents advice to invest, or disinvest. It is important to get advice before making any investment decision. All figures and data were correct at time of writing.