By Greg Peel

The Dow closed down 77 points or 0.7% while the S&P lost 1.0% to 1192 and the Nasdaq fell 1.2%.

America had its AAA rating confirmed last night. And its outlook was deemed to be "stable". The announcement came from Fitch, however, and not S&P. Moody's had previously confirmed its AAA rating as well.

All eyes were on Europe last night and the meeting between German chancellor Angela Merkel and French president Nicholas Sarkozy (now dubbed "Merkozy"), who had joined forces in Paris to try to nut out an even more substantial and effective solution to Europe's debt woes than those previously implemented. Wall Street, and the world, was hopeful.

It was not expected to be a brief affair, so prior to any announcement markets had to deal with the first estimate of the eurozone's June quarter GDP. It came out as 0.2% growth when 0.3% growth was expected, and worryingly that "miss" was due to only 0.1% growth from European powerhouse Germany when 0.5% was expected. It must be remembered, of course, that while it's easy to think of Germany as the "China of Europe", being another US creditor, it still runs a budget deficit, that deficit has exceeded ECB restrictions like everywhere else in the eurozone, and budget cut measures are in place.

I will also throw in my long held view that backward-looking technical definitions of a recession are useless, misleading and even dangerous, and that in reality recessions are a state of mind. If you think things are getting worse then they will, because you will facilitate the slowdown by being cautious. In the June quarter, the eurozone debt issue blew up once more with a particular focus on the touch-and-go Greek parliamentary vote on tougher budget cuts. Is that a climate in which all Europeans feel keen to borrow, spend and invest?

The disappointing eurozone GDP number had Wall Street off to a weaker start, although stocks recovered early losses on some local economic releases.

US industrial production in July rose 0.9% following 0.4% growth in June and against expectations of only 0.6%. Capacity utilisation grew to 77.5% from 76.9% in June against expectations of 77.0%. This is the economy which is supposed to be heading into double-dip. But the problem is, July production preceded the market mayhem in August, and hence economists expect the August numbers to be weaker given the fear that mayhem generated.

See? Recessions are a state of mind.

US housing starts fell 1.5% in July to mark 9.8% growth year on year. That's the lowest growth rate since records were first kept in 1959. The only silver lining here is that economists had expected a slightly bigger fall.

Then just as Wall Street was weighing all this up, Merkozy appeared on television screens. Markets went suddenly quiet.

To preface, the two major elements the more hopeful in the world were looking for was a big increase in the EFSF (European financial stability fund), and talk has been of an increase to E2 trillion from the existing E400bn, and the introduction of a pan-eurozone bond which would allow the ECB to manage the debt crisis in a blanket rather than piecemeal fashion, mimicking the manipulation the Fed is able to achieve with US bonds. Those with a less rosy tint in their glasses have nevertheless been more pragmatic.

In the case of the EFSF, the parliaments of all EU member nations would have to agree and those with the means would have to chip in. The bulk of the responsibility would fall to Germany, and German taxpayers are already fed up with bailing out Club Med. In the case of the eurobond, it would require sixteen member nations to overcome thousands of years of hatred and agree to let an appointed, representative super-committee to unilaterally control their sovereignty.