All Well with the UK, if You Discount Asia

Retrospect is a wonderful thing and most adages don't stand up to statistical scrutiny.

If we'd had the former and ignored the latter we could have saved ourselves a 9 percent loss on the FTSE-100 since the beginning of May.

At the least the weather's finally turned nice in the UK.

If only those politicians in Europe and the US could get a grip, then we'd all be better off, I hear you say.

They could even take a leaf out of Dave and Nick's grand coalition, who are talking tough on the budget. That nice Mr. Laws (you know, the ex- investment banker turned Lib Dem Chief Scrooge to the Treasury) says welcome to the age of austerity and already things look better

Total borrowing for the last tax year is £13 billion ($18.85 billion) less than Alistair Darling forecast in March and the DMO got such strong demand for a 10-year Gilt auction last week they could actually raise the price.

Add in an expected upward revision to this week's GDP figure because of higher business investment and the clouds have all drifted away.

OK, so I might be clutching at straws. But just wait until June 22. I love the announcement of a good fiscal tightening and, funnily enough, so do the credit agencies.

For now, Britain might just be off the hook. We can service our debt, policy looks good and the numbers are heading in the right direction, albeit from a horrific starting point.

Great, I'll pour another Pimms and relax , Her Majesty's Government has got it covered. Except, I do have this nagging feeling about elsewhere, and I don't mean the euro zone.

The latest stock selloff has really been a readjustment on forecasts of global economic growth.

As Mike Lenhof from Brewin Dolphin puts it, "the dollar bloc (notably the US and China) led the way in the global recovery. With the rise in the dollar a risk now is that its contribution to the global upswing lessens and that this in turn results in a loss of the earnings ‘momentum’ behind the rapid upward revisions to global earnings expectations."

It's also notable how big a part commodities and basic resources played in the falls since April. Although China has not raised interest rates, it has been curbing bank
lending and attempting to micromanage a cooling down of the economy.

If you've priced Chinese growth at 8 to 10 percent and we now get 6 to 8 percent, that has to put a squeeze on the whole Asia Pacific economy and affect global asset prices.