Risk aversion took hold as problems in Europe remained in the spotlight.
Worries continued that the treatment of Cyprus is setting precedence for penalising deposit holders for Europe's already fragile banking system.
Cyprus is planning on opening banks tonight for the first time in two weeks and have imposed capital controls to help prevent a run on banks.
In Italy, Democratic Party leader Bersani continued to struggle to form a coalition government.
Weakening sentiment saw the Euro Stoxx fell 1.1%. In the US, the Dow fell 0.2% and the S&P500 dropped 0.1%, but the Nasdaq managed to gain 0.1%.
US treasuries rose (yields fell) as concerns about Europe. Housing data, which came below expectations, may have also boosted demand for safe-haven assets.
Italian bond yields rose after lower demand at an auction.
Concerns about the political situation and the broader European banking system were also weighing on investors.
Yields on Italian ten-year bonds rose 21 basis points.
Meanwhile, in Spain, ten-year bond yields rose 14 basis points.
The US dollar rose against most currencies on lower risk appetite.
The euro fell to its lowest in four months as concerns about the debt crisis escalated.
The Japanese yen initially weakened on media reports that the BoJ will likely start open-ended asset purchases at its next meeting on 4 April instead of next year, but recovered on last night's developments.
Expectations of more aggressive monetary easing from the BOJ are mostly "priced in".
The Australian dollar fell to just below 1.045 last night, tracking weaker sentiment.
The broad CRB commodity price index rose despite concerns on Europe.
Oil prices rose following a minor disruption at a major refinery.
Gold prices rose as euro zone worries boosted safe-haven demand.
The RBA released its semi-annual Financial Stability Review yesterday. It said the Australian banking system is strong and well able to meet the Basel III rules.
It noted business bankruptcies were above average, but that gearing ratios are low overall.
On the household front, the RBA said financial stress was low, with most households well placed to meet their debt obligations.
Household wealth has been rising and the RBA noted some signs of recovery in housing markets.
The RBA said global financial conditions have improved significantly over the past six months.
The Euro zone business climate index slipped from -0.72 to -0.86 in March, its first fall since September last year.
Similarly, economic confidence dipped from 91.1 to 90.0 in March, its first fall since October.
Just like in 2011 and 2012, early year confidence is starting to fade, as Italian politics and the Cyprus bailout provide a reminder that issues remain for the region.
The German GfK consumer confidence was unchanged at 5.9 in the April survey.
UK GDP growth was unrevised at -0.3% in Q4.
The current account deficit narrowed from £15.1bn to £14.0 bn in Q4, while the decline in business investment was revised from -1.2% to -0.8% in the quarter.
US pending home sales fell 0.4% in February, however, it followed a revised 3.9% rise in January, so that the level of sales in February was still the second highest of the cycle so far last month.
Lack of supply of decent homes for sale continues to be cited as a constraining factor on the market.
Cleveland Fed President Pianalto would favour slowing asset purchases if the recent 200k per month payrolls increases were to be maintained.
Boston Fed President Rosengren also spoke and would raise or lower the purchase pace in response to the incoming data.
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