By Greg Peel

The Dow closed up 3 points, while the S&P lost 0.2% to 1548 and the Nasdaq dropped 0.3%.

The Cypriote parliament last night voted to reject the eurozone proposal for a bail-out involving a levy on deposits, large and small. It's back to the drawing board for the eurozone ministers if they are to prevent a collapse of Cypriote banks and a default on government debt.

The Cyprus shock has polarised commentators across the globe, with opinions split between those shaking off Cyprus as a tiny economy of global insignificance and those warning of a run on banks across Europe if the Cyprus solution is feared to be a precedent for what may come elsewhere. With the benefit of hindsight, the eurozone ministers would no doubt agree the PR on this particular bail-out was poorly handled.

The excuse is that Cyprus is different. Cyprus is a banker to foreigners, particularly rich Russians, such that the size of the Cypriote banking system is around eight times the size of its economy. By comparison, the US banking system is roughly the same size as the US economy. It is this anomaly that has encouraged eurozone ministers to formulate a different solution for this particular bail-out. While normally bondholders would be expected to take a haircut, this time bonds are not the major source of lending ? deposits are, and the bulk of which are owned by foreigners exploiting Cyprus' attractive banking laws.

The Cypriote banks are heavily invested in Greece. Greece is another anomaly, given its financial collapse was all to do with excessive public spending, tax evasion, cooked books and general corruption. Others to be bailed out in the eurozone, such as Ireland and Portugal, and those running a close race, being Spain and Italy, came to the economic brink by more familiar means ? unfettered lending to property development and investment in toxic derivatives.

Presumably the eurozone ministers can come up with a tempered solution that will appease the small Cypriote populace, while still forcing foreigners who have exploited the island's economy to cough up. Protection from levy for deposits under E100,000 has been mooted, much in the same way the Rudd government moved swiftly to guarantee Australian deposits under $100,000 in 2008.

Whatever the case, the world is once again nervous, although not quite as nervous as such European bombshells would have evoked two or three years ago. Stock markets have lost their previously solid momentum ? Australia's strong rally and substantial turnaround yesterday is a case in point ? but for most this seems like a good time to take profits and hang back for a while anyway. There's no panic, just pause. The Dow was up 70 points in the morning and down 60 in the afternoon before closing flat.

The US data release of the session was February housing starts, and once again the numbers exceeded expectation. Starts rose 0.8% and in particular single home starts rose 0.5% to their highest level since June 2008. Year on year, total starts are up 28%, and February building permits, which precede starts although not all convert, jumped a whopping 4.6%. The US housing recovery is alive and well.

Over in Europe, the German ZEW investor sentiment index for the month surprised with a solid increase but on the flipside, eurozone construction output fell sharply in January, underscoring expectations of another quarter of GDP contraction for the region.

The euro thus continued its Cyprus-prompted slide last night (arguably just what Doctor Draghi ordered), sending the US dollar index up another 0.3% to 82.91. The Aussie has fallen 0.3% to US$1.0371. Safe havens are seeing a renewal of interest, with the US ten-year bond yield falling another 5bps to 1.91% and gold rising another US$7.90 to US$1612.90/oz.

Base metals stalled after their big falls on Monday night, albeit copper and tin saw continued weakness. Oil seems to have had a delayed reaction, with the uncertainty of the proposal and rejection of the Cyprus bail-out suddenly sparking big falls on either side of the Pond. Brent is down US$2.06 to US$107.45/bbl and West Texas is down US$1.61 to US$92.50/bbl.

Spot iron ore is down US20c at US$134.40/t.

After yesterday's turnaround, the local market seems to have decided a pullback is due anyway, with the SPI Overnight closing down 25 points, or 0.5% last night. Having fallen back through the 5000 break-out level, the ASX 200's next important technical level is 4950, or 37 points below yesterday's close. A breach of that may spark some serious selling, technical analysts argue. Next stop 4800.

David Jones ((DJS)) will post its interim result today, while tonight the Fed will deliver a monetary policy statement, updated economic forecasts and hold a press conference.