By Greg Peel

The Dow closed down 29 points or 0.2% while the S&P closed flat at 1369 and the Nasdaq gained less than 0.1%.

I posed the question yesterday as to whether markets had already priced in the weekend's European election results by Friday. I also posed the question last week as to whether markets might actually perceive a stimulus-based response to the euro-crisis as more promising than an austerity-based response. On the strength of Australia's capitulation yesterday, the answer would be no to both. However last night's trade offshore paints a different picture.

The Australian market perhaps has some excuse, given the final piece of the PMI jigsaw proved to be even worse than the other two. The manufacturing sector, service sector and construction sector PMIs (referred to in Oz as "performance of") together represent the non-mining economy, and scores of 43, 39 and 34 paint a picture of serious recession. Construction is the real shocker but then it has been for some time.

Yesterday was not really about local economic data however. It was more about omigod here we go again. The expectation was that the European and US markets would completely tank last night, despite the fact the election results were pretty clear by Friday night's session. They did give it a shot first up, with the French market, for example, falling 2% on the open, the euro trading under US$1.30, and the Dow falling over 60 points. But that was all. France turned around to post a 1.7% gain for the session, the euro recovered, and Wall Street came back to square. All compared to a 2.2% drop in Australia.

Had the world been enormously worried about the European elections, global markets would have been a lot lower before the weekend just on poll results. They were clearly lower, but not by any means panicked. I suggest there are three points to consider:

Firstly, those outside Europe have never been particularly comfortable with the plan to reduce sovereign debt through austerity. Cutting budgets may reduce the need to borrow, but revenues are still needed to actually reduce existing debt levels. Cut revenues through forced recession and all one ends up doing is going nowhere fast. Spend your way out of recession with monetary stimulus and economic growth will provide for faster debt reduction. As for monetary inflation, that risk seems a long way off.

Secondly, and in combination with the first point, capitalists love "funny money". Wall Street has returned