By Greg Peel

The Dow closed down 54 points or 0.4% while the S&P lost 0.1% to 1404 as the Nasdaq rose 0.3%.

It was the first trading day of September ? historically the worst month of the year for equities ? and the first day back from the bulk of Wall Street's summer break. As an opening gambit, and perhaps reflecting no great step-up in commitment from the Fed at Jackson Hole, traders sold the Dow down 113 points from the open to below 13k.

Also creating much discussion were comments from Mario Draghi to the European parliament in a closed door session early yesterday that the purchase of one, two, or even three-year sovereign maturities would not constitute a breach of the ECB charter. The comments open up the possibility of the ECB acting without having to wait for the court ruling on the legality of the ESM.

In response, the Spanish two-year bond yield fell 47 basis points to 3.02% and the ten-year 29bps to 6.56% last night. Italy's respective falls were 26bps to 2.49% and 13bps to 5.58%. We must remember, however, that the ECB will not do anything until Spain asks for a bail-out, and Spain will not ask for a bail-out until it knows what that bail-out will look like.

Then there's a debate about whether buying short dates is actually helpful. It won't particularly hurt, but given the sovereigns borrow money to fund their budgets at longer maturities, short-end purchases would not be as effective as directly buying ten-years. Such a policy would not be the bazooka the world is looking for, just another pop gun.

PIMCO's Bill Gross disagrees, suggesting in a tweet last night that such a policy would be reflationary and advising to buy inflation-linked bonds and gold. When the head of the world's biggest bond fund speaks, the world listens, even if Gross said to sell US ten-years at around 2.5% only to watch yields fall to 1.4%. Gold's response last night? Up US$3.30 to US$1695.90/oz.

The stock indices nevertheless turned around at that point, whether or not Gross was responsible. The Dow had regained nearly all of its losses at 3pm before late selling appeared in the last hour. Strength in the Nasdaq was largely attributable to anticipation Apple is about to launch the iPhone 5. The S&P split the difference.

The US manufacturing PMI came out last night ? a day late due to the holiday ? and it showed a fall to 49.6 from 49.8 when economists had expected 50.2. Wall Street probably prefers a fall, as it doesn't provide Bernanke with any new reason not to stimulate. The wash-up is that the manufacturing sectors of all of Australia, China, the eurozone, UK and US are in contraction. Wall Street, nevertheless, is hanging around four-year highs. The stimulus had better be good.

The RBA saw no reason to provide more stimulus yesterday ? in the form of a rate cut ? noting borrowing costs are a little below average in Australia and that effect is still working through the economy, while inflation remains low and growth is at close to trend. Glenn Stevens did nevertheless water down his global economic assessment compared to previous months in acknowledging the slowdown in China and its impact on "important" commodity prices. He did not, however, seem at all panicked.

As to whether we'll see a rate cut in October or later in the year is thus still unclear. Clearly, a lot will depend on what happens offshore between now and the next meeting, particularly with regard to the Fed, ECB and PBoC. Global and Australian confidence is hanging in the balance, and confidence makes all the difference to economic performance. More immediately, today sees the release of Australia's June quarter GDP result.

The US dollar index rose 0.2% last night and the Aussie, despite having a brief bounce on the RBA's "no change" announcement, is down 0.2% over 24 hours to US$1.0226. Base metals were mixed and uneventful last night in London.

Oil was a bit busier, with Brent falling US$1.68 to US$114.22 and West Texas falling US97c to US$95.50/bbl. The moves largely reflected the three-day break having provided time to assess the damage at both drill rigs and refineries in the wake of Hurricane Isaac, which is deemed to have been minor.

The SPI Overnight was down 12 points or 0.3%.

We're looking for 0.8% growth for the GDP today, down from March's shock 1.3% result. Today is also service sector day, with Australia, China (HSBC), the eurozone and the UK all reporting services PMIs, followed by the US tomorrow night.

Two more sleeps till Draghi.

All