By Greg Peel

The Dow closed down 32 points or 0.3% while the S&P lost 0.3% to 1375 and the Nasdaq fell 0.7%.

I have been suggesting all week that despite optimism in some circles, consensus had the Fed not making any policy changes this month. And so it was, and hence Wall Street did not plunge on the news. If anything, the Fed statement reinforced expectations of QE3, or something like it, being introduced at or before the September meeting.

There were subtle but meaningful changes in the Fed's language in comparison with the central bank's previous statement. In June, the Fed suggested the US economy had been "expanding modestly". Last night, the economy was described as having "decelerated somewhat". The August statement reiterated that the FOMC would monitor the data closely, but while in July the Fed was only "prepared to take further action if appropriate", this month the Fed "will provide additional accommodation as needed".

As far as Wall Street is concerned, the Fed may not have rolled out QE3 last night but it did edge slightly closer to a roll-out. Much will depend, one presumes, on what the ECB might deliver tonight. If Draghi picks up the ball and heads straight for the try-line then Bernanke may be required do no more than run along behind in support if needed. But if Draghi fumbles, it may be left to Bernanke to tidy up and steady play. The world economy is hinged on what is to happen next in Europe.

The global round of manufacturing purchasing managers' index (PMI) releases over the last 24 hours has provided little less than a tale of woe, with all of Australia, the eurozone and UK registering three-year low readings. This implies the rate of manufacturing sector contraction is as fast as it's been since 2009 in each region.

Australia's manufacturing PMI surprisingly improved in June but this has proven to be a blip, with the July reading plunging to 40.3 from 47.2. It's the fifth fall in six months and the lowest read since June 2009. China's official number of 50.1, down from 50.2 in June, shows Beijing's stimulus measures to date are yet to gain traction, and markets are still putting a lot of faith in stepped up policies ahead. The unofficial HSBC equivalent actually gained, but at 49.3 (up from 48.2) it still indicates contraction.

The eurozone continues to sink slowly into the mire at 44.0, down from 45.1, to mark eleven consecutive contractionary results and a three-year low. While this may be no great surprise, the surprise within the sub-numbers was a big fall in German new exports ? a greater percentage than any other eurozone member. If German exports are on the slide, one wonders what the attraction is for Germany in even being a eurozone member. It's all meant to be about enjoying the benefits of an artificially devalued currency.

The UK also posted a three-year low with its read of 45.4, down from 48.6, and with the ECB in the spotlight it's easy to forget the Bank of England will also likely announce increased stimulus tonight. Finally, the US reading ticked up to 49.8 from 49.7 which is more heartening, except that economists had expected a move back into expansion (50+).

All the focus is on what will transpire in Europe tonight, but the July US jobs data are not being forgotten. Last night the ADP private sector survey showed an increase of 163,000 jobs in the month ? down from 172,000 in June, but better than the 120,000 expected by economists. This bodes well for the non-farm payrolls number due on Friday, but I've lost count of how many times a good ADP has forced up expectations only to meet a shocker of a payrolls result.

Given the Fed has stated its particular concern over stubborn US unemployment, Wall Street would probably prefer a shocker on Friday night.

While the stock market response to no Fed move was fairly subdued, there was a bit more of a reaction in markets elsewhere. QE3 means printing more dollars, so no QE3 had the US dollar index up 0.6% last night to 83.13. This move helped the Aussie to slip for once, down 0.4% to US$1.0461. QE3 means the Fed buys bonds, so no QE3 had the US ten-year yield rising 5bps to 1.54%.

QE3 means monetary inflation, so no QE3 had gold falling US$15.50 to US$1599.80/oz. The stronger US dollar also sent base metals prices lower, with consistent falls of 1.0-1.5%. Oil bucked the trend nevertheless, preferring to respond to an unexpected (when are they ever expected?) weekly US inventories reduction. Brent jumped US$1.76 to US$105.96/bbl and West Texas gained 78c to US$88.84/bbl.

The SPI Overnight fell 10 points or 0.2%.

It's all a bit academic, as what really matters to the course of global markets will be tonight's announcements. A simple rate cut from the ECB will not cut it, and even a new LTRO in isolation will fall short. The world wants to hear that Spanish and Italian bonds will be supported, whether by the ECB or the ESM or both. Anything less than such a commitment will be met with a sharp sell-off.

It's retail sales day in Australia today, and Independence Group ((IGO)) will report its full-year result.

Rudi will appear on Sky Business today at noon.

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