By Greg Peel

The Dow closed down 119 points or 1.0% while the S&P fell 1.2% to 1204 and the Nasdaq lost 1.3%.

The good news in Australia yesterday was a 0.5% jump in July retail sales when economists were expecting only 0.2%. There is certainly a suggestion retail expectations have become too gloomy, and retail sector stocks oversold, but there are a couple of points to consider. Firstly, it's the first rise after three months of falls, so sales have been rebased to a lower level. Year on year growth is a mere 1.4%, which compares to a long-run average of 3% and a noughties boom average of 6%. Secondly, these are July numbers, and August has been a shocker for consumer confidence.

Capital expenditure is one of the most important economic drivers and determinants of GDP growth, and yesterday's increase in Australian capex in the June quarter of 4.9% was a solid result. It is enough for economists to suggest the June quarter will see a rebound into growth territory for the June quarter GDP, with forecasts currently sitting just under 1.0%. Year on year capex has grown by 11.8%, which includes slippage caused by weather disruptions in the March quarter. It's no great surprise that most of the capex growth has been derived from the mining states.

Of vital importance to economic forecasting is the survey of capex intentions going forward. This number is 18.5% higher year on year. Are we in a two-speed economy? Mining capex intentions are up 45%, service sector intentions are down 2%, and manufacturing sector intentions are down 6.6%. Note that the RBA pays very close intentions to capex intentions as a guide to inflation expectations, which in turn are the most fundamental driver of monetary policy. Net capex intention growth of 18.5% does not support talk of rate cutting. Although again, August may have put a dent in the numbers.

It's still not good news for Australia's near obsolescent manufacturing sector. Yesterday it was revealed Australia's manufacturing purchasing managers' index (PMI) fell to 43.3 in August from 43.4 in July. In the past twelve months only two have shown growth (result above 50) and ten have seen contraction.

China's manufacturing PMI rose officially to 50.9 from 50.7 in July, and unofficially (HSBC) to 49.9 from 49.3. Take your pick of slight expansion or slight contraction, but either way it's an improvement from July and an indicator China's policy-inspired slowing may have bottomed, which is always good news for Australia (unless you're in manufacturing).

The eurozone's PMI fell to 49.0 from 50.4 which is the first contraction result since September 2009, while the UK PMI fell to 49.0 from 49.4 to mark a 26-month low. Austerity measures are clearly having an impact. The good news, however, was that the US number fell to 50.6 from 50.9. It's good news because all and sundry were braced for contraction (number below 50).

So what does Wall Street do on good news? It buys of course. On the release early in the session the Dow shot up 100 points in a blink.