Early in the morning yesterday Spain's finance minister said the country is reviewing a financial aid proposal by the European Central Bank.
Further on, EU Commissioner Olli Rehn said that he doesn't expect the Spain's bank recapitalization to affect the structural deficit and added that Spain's 2012 deficit target is within reach.
However, Investors remained cautious as Moody's rating agency's was to give its latest review of Spain's sovereign rating, which may see it downgraded to junk status.
By the end of the day, Europe equity market chose to ignore potential risks and closed in a small rally with France’s CAC 40 rallied 2.39%, while Germany’s DAX 30 jumped 1.53%.
The US session wasn’t as rosy as they peers in Europe as mixed data cooled down the demand for riskier assets.
U.S. ISM manufacturing PMI rose more-than-expected last month, industry data showed on Monday. Whereas, U.S. construction spending fell unexpectedly last month.
At the close of the session, the Dow Jones Industrial Average rose 0.58%, the S&P 500 index advanced 0.27%, while the Nasdaq index climbed 0.09%.
Today, Asian stock markets were mixed Tuesday with low demand as China, S. Korea and Hong Kong were closed for holiday. Ongoing concerns over the weakening global growth outlook continued to weigh on appetite for riskier assets, but markets in Australia ended up 1% after the Reserve Bank of Australia announced an unexpected rate cut.
RBA cut its benchmark interest rate to 3.25% from 3.50%. Most market analysts had expected the central bank to stay put on his monetary policy.
RBA Governor Glenn Stevens said, “The board judged that, on the back of international developments, the growth outlook for next year looked a little weaker, while inflation was expected to be consistent with the target.”
Later in the day, the euro zone is to release data on producer price inflation, while the U.S. was to produce a report on total vehicle sales for September. Meanwhile, investors were waiting to see whether Madrid will seek a bailout and trigger the European Central Bank's bond buying program.
AUD/USD The Australian dollar dropped to a three-week low against its U.S. counterpart on Tuesday, after the Reserve Bank of Australia cut interest rates for the third time in six months, while investors continued to focus on developments in Spain.
Follow the enouncement the Aussie fell to as low as 1.0292 during European morning trade, the pair's lowest since September 7, but then he pair subsequently consolidated at 1.0307, declining 0.52%.