SCOREBOARD: Mediterranean misfire

All the talk overnight is still about those protests in Madrid that I mentioned yesterday and of course the decision by one of Spain's regions (Catalonia) to call an election on independence (to be held November 25). All the news in Europe is bad at the moment – throw in some more protests in Greece, anxiety about whether Spain will ask for a formal bailout – and everyone's talking about the eurozone imploding again.

It's caused havoc needless to say and Spanish stocks were off nearly 4 per cent for the session, while their bond yields shot up – both the 2 and 10-year up about 26bps to 3.34 per cent and 5.99 per cent respectively. The Italian equivalents were up 14bps and 10bps to 2.47 per cent and 5.13 per cent. Still below, well below, the panic levels we have seen, but there you go. Don't forget that on Friday Spain's government provides a final estimate of how much capital their banks need. They're saying it should be less than €62 billion which is great given they've got a €100 billion line of credit.

Now, I should note that there are some news reports suggesting eurozone finance ministers are questioning whether this can in fact become operational. The issue is a statement they made suggesting that the European Stability Mechanism will deal with new problems under the new supervision, but that legacy assets must be dealt with by individual countries. My read of the situation is different and that the eurozone finance ministers were just restating what they declared in June – and that is, that the ESM funds would be distributed to Spain's banks, via Spain's own national bailout fund. Which of course would mean that technically this is in fact being done, supervised, directed – whatever – by the sovereign, rather than the ESM. Bad banks would also come into that as well.

In any case, the major stocks in Europe all took a tumble and we saw the Dax off 2 per cent. The CaC down 2.8 per cent, while the FTSE fell 1.6 per cent. Things were slightly better in the US, and naturally that's because the United States is a paragon of fiscal virtue and monetary rectitude. That said, the major indices were all down – with the S&P500 finishing 0.6 per cent lower (1433), the Dow off 0.3 per cent (13413), while the Nasdaq underperformed that to be 0.8 per cent in the red (3093).

Most of that momentum can be attributed to the Europeans, but for what it's worth, new home sales disappointed as well, falling 0.3 per cent in August compared to the 2.2 per cent expectation. Still, that's not too bad following a 3.6 per cent rise the month prior and given most other indicators are on the up, I'm not sure this would have weighed too heavily.

Energy, conversely, did weigh heavily and that's because crude fell another 1.2 per cent overnight to be at $90.2. The fact that's it over, just over, $90 is only due to a late rally into the close. Prior to that it hit a low of about $88– and that's with a fall in crude inventories (EIA reported a fall in inventories of 2.4 million barrel for the week ended September 21). Commodity action elsewhere saw gold down another $US11 to $US1754, while copper fell 1.3 per cent.

In the forex space we saw euro steady at $1.2870, while the Australian dollar was then up 20 pips or so to $1.0368 with the British pound and yen at $1.6162 and $77.72 respectively.

As for rates, there was a comparatively decent rally for US treasuries, well the 10-year, given the global news flow and we saw that yield off 6bps to 1.61 per cent. The 5-year yield was nearly 4bps lower to 0.60 per cent, while the 2-year is at 0.24 per cent. Aussie futures then had a decent rally as well, 3s up 97.69, while 10s were about 6.5 ticks higher at 97.105.

I think that's about the lot, so the calendar today shows there isn't much in the way of data for Australia – job vacancies is about it. This afternoon we see German employment data which is followed up by the final estimate of June quarter UK GDP.

The only other European data of note is the eurozone business climate indicator. For the US, the key data will be durable goods orders, jobless claims and pending home sales.

Have a great day…