By Greg Peel

The Dow fell 41 points or 0.3% while the S&P fell 0.3% to 1328 (having peaked at its 100% gain from the GFC lows on Monday) and the Nasdaq dropped 0.5%.

China's CPI for February was announced as 4.9% yesterday, up from 4.6% in January. Clearly the trend is continuing upward but there are a couple of points to consider. One is that Beijing changed its basket calculation in February which will have distorted the comparative result. The other is that economist consensus had 5.4%, meaning the result was actually lower than expected, but then word went out around the market before the release, apparently, that “the official number will be 4.9%”.

So again we face the fact – and I mean fact – that China's data are concocted in Beijing. Not a lot we can do about it. New loan growth nevertheless fell in China which, if anywhere near accurate, suggests monetary policy tightening is starting to have an impact. It's not yet enough of an impact, however, for economists to suggest Beijing will ease up. Further rate rises are expected ahead.

The UK last night released its January CPI (everyone else takes some time to work these things out) and it showed a jump to 4.0% from 3.7% in December. Pressure is building on the Bank of England to raise its cash rate from the 0.5% emergency low at a time when the country is under strict austerity budgeting.

The eurozone's fourth quarter GDP came out at 0.3% growth, matching the third quarter but falling short of the 0.4% expected. A steady result nevertheless, but more attention was being paid last night to the meeting of finance ministers in Brussels. Agreement was finally reached on a permanent bail-out fund to the value of E500bn, but any further details or decisions on immediate debt problems were put off.

There thus remains uncertainty in Europe, and the rolling unrest in the Arab world is spreading – right out of the Arab world. There are now protests in Iran, bringing the Persians into the mix to suggest it's not just an Arab thing, it's a dictatorship thing. Tunisia, Algeria, Egypt, Yemen, Bahrain, Iran – who's next? Remember the Berlin Wall.

On Wall Street last night it was all about economic data. Punters were brought down a peg or two from their current euphoric high when the January retail sales number came in at only plus 0.3% which is the weakest rise since mid-2010. Heavy snow was, however, quickly blamed. The NAHB index of housing market sentiment stayed firmly stuck on a lowly 16 where it's been for four months now. This is a 50-neutral index.

The Empire State (New York) manufacturing index rose to 15.43 from 11.92 last month which was a good result. But economists noted rapidly rising prices which are squeezing margins.

Wall Street remained weak all day on the poorly received data, but commentators agreed that after a good run it was time for a bit of profit-taking.

It's all about inflation across the globe at present. The US releases its CPI on Thursday but in the meantime gold pushed a bit higher last night, rising US$10.70 to US$1373.20/oz and no doubt keeping an eye on Iran as well as inflation. One might have expected oil to rise further on unrest in Tehran but last night Brent eased US83c to US$102.06/bbl.*

The US dollar remained steady at 78.60 on its index but the Aussie has fallen 0.8% in 24 hours to US$0.9948. This is clearly a response to the minutes of the February RBA meeting, released yesterday, which yet again reinforced there simply will not be another rate rise for some time. Why Aussie dollar punters still jump at every bit of data (housing finance on Monday is an example) is a mystery.

As I have noted, stocks and commodities have been moving in lock-step of late and as such some profit-taking was also experienced in London, where metals all fell back the same 2% or so they rose on Monday night. The flipside to the stock/commodity trade is bonds, and last night the US ten-year ticked down a couple of points to 3.61%.

The SPI Overnight fell 6 points.

It's another big data night tonight in the US with industrial production, housing starts, and the PPI all due for release, along with the minutes of the last Fed meeting.

In Australia it's BHP ((BHP)) day (buyback?) within a batch of results which also include CSL ((CSL)) and Westfield ((WDC)).

*Overnight Brent crude prices are now available in the FNArena price table alongside WTI, albeit we have now dismissed WTI as an indicator.

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