SCOREBOARD: Locking profit

Not the most exciting session, I'll be honest. The offer was put on stocks early and stayed with the market throughout – although US stocks have just managed to lift into the close. Moreover while moves were to the downside were solid, there was no major catalyst, or new flare of up. I get the impression most investors are just biding their time, waiting for some signal to either take stocks higher or no. Or maybe with the US election about two weeks away, people are just waiting for that. They've had a good run after all. In the interim, some are locking in profit.

For the European session we saw the Dax off 0.7 per cent, the CaC down 0.6 per cent, while the FTSE was off 0.2 per cent. The key European news was probably more supportive of stocks than anything given the Spanish government came up trumps in regional elections. Now I should note that the government actually lost the election or looks to, in the Basque county. But they didn't rule this by themselves anyway, and had a coalition with the main socialist opposition. Separatists and pro-independence parties gained the upper hand here, but this region has a history of separatist sentiment.

On a more positive note, the government actually increased the number of seats held in another region, Galicia, which lets be honest, if there was widespread national dissatisfaction with Spain's reform program you just wouldn't have seen. Having said that, the market seemed more spooked by the result in the Basque Country – bonds sold off and the Spanish 10-year yield rose almost 20bp to 5.47 per cent and as mentioned stocks were all weaker.

Over on Wall Street, markets followed the European lead and then had to deal with some bearish commentary from Caterpillar. Now these comments should be taken in context. They had just reported a 49 per cent surge in profits – record profits and sales that beat forecasts. But the accompanying statements were far from sentiment boosting and the company was concerned about a slowing in global activity and this is what got all the press. In any event, the S&P500 was down 0.8 per cent at the low, although a spike into the close saw the index closer to zero. Just in the black as I was writing (0.04 per cent, 1434). The Dow was at 13340 while the Nasdaq was up 0.1 per cent (3007).

In the forex space, expectations are rising that the Bank of Japan will print more money, monetise some more debt and debase their currency some. The Japanese yen rose to 79.9 from 79.3 (after lunch yesterday) as a result. But it's a crazy game because we know the Fed aren't done yet and QE infinity has some way to run yet – like forever. The Australian dollar is otherwise at 1.0323 or little changed from 1630. Ditto euro which is at 1.3057.

Commodities were then mixed with gold up $4.6 to $1728, silver was 1 per cent higher although copper fell 0.4 per cent. Crude was down 1.5 per cent to $89.1.Otherwise there was nothing really interesting on the rates side, the 10-year sold off a little (yields higher at 1.81 per cent). The 5-year sits at 0.78 per cent with the 2-year at 0.31 per cent. Aussie futures were off 4 and 2 ticks on the 3s (97.5) and 10s (96.915).

A quick word on yesterday's MYEFO. It was a total non-event. As expected the government resorted to accounting tricks and PR to maintain the surplus. This isn't tight fiscal policy on any measure and there is no case to make that it helps the RBA cut rates as a result. The government isn't cutting spending – they are actually increasing it and it stuns me that there are people out there who will blatantly insult you, lie to you by suggesting spending is being cut.

The government is instead waiting for increased revenues to bring them back to surplus. To suggest this helps with lower rates is disingenuous – PR work from a desperate government and their lackeys wanting to boost their position in the polls. The fact is with economic growth well above trend, and easy monetary policy, spending should have actually been cut hard. We should be in surplus already. For investors and the market more broadly there are few impacts other than specific policy announcements. The real test will be next year's budget, when, going into an election discipline will be all but impossible to maintain. I suspect more effort will be put into convincing the electorate that spending has been cut, when it has been increased, than in actually trying to shore up our finances – cut waste etc.

The calendar today shows the dataflow is very light again, so I'm not expecting much. The SPI suggests the All Ords will fall 0.2 per cent in what should be a simple session. There's no major data or news flow to speak of. Indeed tonight the only data includes German imports, eurozone consumer confidence and the Richmond Fed manufacturing index. The Bank of Canada also meets, but no changes are expected.

That's about the lot, have a great day…