By Greg Peel

The Dow closed down 32 points, or 0.2%, while the S&P gained 0.1% to 1445 and the Nasdaq added 0.2%.

Here's the question: Is it better if Spain doesn't request a bail-out, or if it does? Logic would suggest that we should be relived if Spain doesn't need a bail-out, but we're dealing with politics here ? the antithesis of logic. For the Spanish government to request a bail-out would be to admit defeat, which one presumes would be followed by electoral defeat. Yet Prime Minister Rajoy has now brought down a stricter budget ? anticipating the sort of budget that might be required under bail-out terms ? and there have been riots in the streets. It's not the stuff of vote winning.

The other side of the argument is one of "Just give them the money and we can all get on with it". The enemy of financial markets is uncertainty, which leads to lack of confidence. If a strict, growth-impeding budget in Spain is already in place, what's the difference? If they take the money now then we can stop worrying about whether Spain's going to blow up or not.

In between all of this is the bond market. The ECB will buy Spanish bonds and thus cap yields if Spain asks for a bail-out. Knowing that, bond traders have reduced Spanish bond yields to less imposing levels. Lower yields mean Spain can borrow to finance its budget deficit at a less imposing cost, and thus perhaps avoid a bail-out. As I have suggested before, Joseph Heller would be proud.

An interesting twist arose last night, nevertheless, when a newswire service suggested that Rajoy was all set to ask for a bail-out this weekend, but has been told by Germany to wait. There was no explanation as to why. Rajoy held a press conference last night following a Spanish regional leaders meeting at which he dismissed the newswire report before announcing that he would not be asking for a bail-out this weekend, and indeed that such a request was "not imminent".

On that news one might expect bond markets to sell Spanish bonds, but if they do then Spain will probably have to ask for a bail-out in which case the ECB would jump into action. So instead, the yield on the Spanish ten-year fell 13bps to 5.71% last night ? well down from levels of over 7% that prompted the ECB to promise action. And the Spanish stock index rose 1%.

Wall Street had been largely expecting the bail-out request would indeed come this weekend. When Rajoy's statement hit the wires, US stocks took a dive. The session had already begun on a weak note with commentary citing growing nervousness over the September quarter earnings result season that begins next week. The season "officially" starts with the first Dow stock ? Alcoa ? but there have already been a few early birds and in fact they have provided a net upside surprise. But with bellwethers like FedEx and Caterpillar having provided profit warnings recently, Wall Street is anxious about the guts of the market results.

Before noon, the Dow was down 91 points. But there it bottomed. There were no major economic releases of note last night, so from somewhere came the buyers. The S&P even finished in the black, given Apple (around 5% of the S&P and 20% of the Nasdaq) saw a late surge.

[Side note: With a share price of over US$600, Apple is not allowed in the Dow Jones Industrial Average. Apple would need to conduct at least a four-for-one share split in order to qualify.]

And so we continue to play the game between those who think the market has run too far and that QE3 won't work, and those who believe QE3 will help Wall Street to new all-time highs. When the indices are strong in a session, the sellers come in late, and when they're weak, the buyers come in late. Volumes remain mediocre given those huge amounts of cash on the sidelines. If that cash is finally unleashed into the stock market, look out. However, funds are continuing to flow out of US mutual funds on each month's figures, not in.

The RBA cut its cash rate yesterday by 25bps to 3.25%. If you want to keep things really simple, here's why:

The Aussie is subsequently down a cent from yesterday morning at US$1.0268 despite the US dollar index ticking down 0.1% last night to 79.73. Gold is steady at US$1774.20/oz.

Base metals were all up and down by not a lot last night while oil drifted lower for no obvious reason. Brent crude fell US85c to US$111.34/bbl and West Texas fell OS80c to US$91.68/bbl.

The SPI Overnight, however, rose 17 points or 0.4%, with the physical having already put in a solid performance yesterday with a little help from Glenn Stevens.

Australia's trade numbers are out today along with new home sales, and today also sees the global round of service sector PMIs. Tonight in the US the private sector, jobs numbers are released.

All