By Greg Peel

The Dow closed down 42 points, or 0.3%, while the S&P fell less than a point to 1614 and the Nasdaq fell one point.

What madness have we experienced in the local market these past two sessions? I hinted yesterday that Bridge Street's 1.9% panic sell-down on Monday seemed overdone given the Chinese data, while not comforting, did not shock. Although, if the world is exiting Australia it's best just to stand aside. But Australia was about the only market to panic, a social gaffe rectified by yesterday's equivalent rebound from the opening bell. Whoops.

Then came the RBA policy statement. No one expected a rate cut, but clearly there was concern that since the Aussie had fallen substantially, including from the previous meeting, perhaps the central bank would signal that no more rate cuts are needed. This would not be good news for a still struggling economy. But fears were alleviated.

"The Australian dollar has depreciated by around 10 per cent since early April, although it remains at a high level. It is possible that the exchange rate will depreciate further over time, which would help to foster a rebalancing of growth in the economy," said Glenn Stevens.

Obviously Stevens considers the Aussie to have been more than 10% overvalued, and would welcome a further pullback. One way to encourage further falls is to cut rates. But will the RBA cut again?

"The Board judged that the inflation outlook, as currently assessed, may provide some scope for further easing, should that be required to support demand."

This sentence has appeared in the last few statements, so it's not new news. Rather, the fact the sentence was not omitted this time assuaged those worried the easing cycle may have come to an end. The result is an Aussie down a cent from yesterday morning.

And the statement sparked another kick to the stock market snap-back, fuelled, no doubt, by some pretty swift short-covering. Retail, for example, is still one of the most heavily shorted sectors (See today's Short Report) and one of the most rate sensitive, albeit yesterday's rally was just as indiscriminate by sector as Monday's fall.

One last word on the RBA statement I found interesting. Stevens usually slips in a mention of the US and Chinese economies, given their influence on Australia. While the impact of Fed tapering talk on US bond yields was noted, there was not one word on China and its recent troubles.

Speaking of troubles, poor old Egypt is at it again. This time the people are gathering to oust the president they democratically chose to replace the dictator only a year ago. To date there has been no bloodshed ? c,mon, this is Africa, not Canberra ? but further MENA unrest does not sit well with financial markets. Egypt is not a major oil producer, but it is a piece in the general energy puzzle, for example piping gas to both Jordan and Israel.

The Egyptian situation appears to be reaching a tipping point, with the military warning it will take over if the president doesn't sort things out. The nervousness is being reflected in oil prices. Last night Brent rose another US95c to US$103.95/bbl, while West Texas jumped US$1.47 to US$99.46/bbl.

Return to strength in oil prices is all about geopolitical tensions, and in defiance of weaker global demand-supply data and forecasts. For Wall Street, one hundred dollar oil (WTI) is a psychological impediment, reflecting the impact of the cost of energy on the general economy.

Last night's US economic data releases were again positive. Factory orders rose 2.1% in May, ahead of 1.9% expected, while strong figures were posted for June auto-sales. At 13% growth, Ford posted its best sales result since 2006 and pipped GM on 6.5%. Toyota won the day, nevertheless, with a 14% increase.

Wall Street opened to the upside on the data, with the Dow trading up 74 points. A combination of factors saw the sellers arrive in the afternoon, to leave the broad market on a flat close. Tonight is a half-session on the NYSE, and traders are squaring up ahead of the Independence Day holiday. There are jobs numbers out tonight or on Friday. Egypt loomed large on TV screens, and just in case you thought Europe had settled down, last night saw the second resignation of a Portuguese front bench minister, threatening the tenuous coalition government and perhaps forcing an election at a time Portugal is trying to fight its way back.

Oh and then there's our old mate Greece. Another bailout tranche is due shortly, and the needle's still skipping on the turntable.

All of the above made the US dollar popular last night, with the index jumping 0.7% to 83.55. This was not good for gold, which fell US$12.20 to US$1241.30/oz. It is also notable that having peaked around 2.65%, the US ten-year yield is now back at 2.47%.

It could have been a bad night for commodities, but it wasn't. Oil clearly defied the dollar, and base metals were little moved in London, preferring to focus on solid US data.

Spot iron ore surged US$2.40 to US$119.30/t. Go figure.

After the biggest single rise in two years posted on the ASX yesterday, the SPI Overnight is down 24 points, or 0.5%. The SPI is often looked to as an indicator of the day's trade, but that's not strictly its role. Yesterday was a clear example, with the "indicator" only wrong by 120 points.

The next 24 hours sees service sector PMI releases across the globe: this morning in Australia, around noon for China, and tonight in Europe, the UK and US. Australia will also see monthly releases for the trade balance, retail sales and new home sales today.

Tonight is the US it's the ADP private sector jobs number, ahead of the NYSE closing at 1pm instead of the usual 4pm.