By Greg Peel

The Dow closed down 62 points, or 0.4%, while the S&P dropped 0.6% to 1552 and the Nasdaq lost 0.4%.

It was always most likely to be something unforeseen that sparked the pullback markets globally have been expecting for the past couple of months, and while Europe was always high on the contender list, no one saw the Cypriote bombshell coming.

The Australian stock market appeared to be in panic mode yesterday except that (a) a steep sell-off was well overdue, (b) the index didn't fall by much more than it rose on Friday, and that jump seemed suspiciously exacerbated by index rebalancing, and (c) the ASX 200 has pulled back to only just above the break-out level of 5000, which is actually quite healthy in technical terms.

The concern yesterday was that markets in Europe and the US would plunge overnight, but while the Dow did drop over 100 points from the bell, the buyers were on board immediately. Aside from there being an ever apparent cohort of investors ready to jump into stocks on any sign of a pullback, fears over Cyprus had already begun to temper when New York opened for business.

There are those ? call them deep capitalists ? who point out that bank depositors are merely unsecured creditors and if they have to take a haircut then they've made a poor investment decision, but the bulk of mankind was staggered over the weekend that the eurozone finance ministers could come up with such a suicidal package. To seize the deposits of the little people is to once and for all destroy the remnants of confidence those little people have in their banks. Without confidence, economies would fall. It's not about the insignificant economy of Cyprus, supposed banker to the Russian Mafia, it is about the precedent being set for greater Europe. A run on Cypriote banks would not be a run in isolation.

The bank deposit levy was proposed on Friday night and ministers and the Cypriote government were to decide whether to go ahead last night, it being perchance a public holiday on the island. They have now postponed the decision until tonight, while closing all banks in Cyprus until Thursday. A failure to panic last night, with stock indices from Germany to the UK and US down only around half a percent, implies an expectation the extremes of the bail-out package will be watered down before those banks reopen their doors.

The euro took a dive from early yesterday and as a result the US dollar index is 0.7% up on its Friday night level at 82.68. The Aussie tanked as well, but has recovered to be only slightly lower than its late Friday level at US$1.0403. While there was a shift into US bonds last night it was no more significant than the fall in US stocks, with the benchmark ten-year yield falling 4bps to 1.96%. Gold shot up yesterday morning, drifted back, and found renewed buying last night before settling with a US$13.00 rise to US$1605.00/oz.

As I had flagged yesterday, the real victims of the event have proven to be base metals, largely on the strength of the US dollar. Aluminium is down 1.5%, lead, nickel and zinc down 2%, copper down 2.5% and tin down 3%. A world away from Club Med, sport iron ore is unchanged at US$134.60/t. Nor were the oils much fussed, with Brent down US31c to US$109.51/bbl and West Texas up US21c to US$93.66/bbl.

In US domestic news, the monthly housing market sentiment index has fallen for the second consecutive month, down to 44 from 46 in February. Industry commentators are not at all concerned, noting sentiment ran a bit riot late last year, growing more rapidly than housing start numbers could keep up with. The pullback is no great surprise. Certainly it didn't seem to much bother Wall Street, which is apparently happy to buy any subsequent stock-dips.

Which brings us to the rock'n'roll circus that is the local market at present. Having fallen by a ton yesterday, indications are for a swift relief bounce this morning with the SPI Overnight up 37 points or 0.7%. Pass me my travel sickness pills.

The RBA will release the minutes of its March meeting today. It's magnifying glasses at the ready in the money markets.