The European Central Bank unexpectedly cut interest rates at Mario Draghi's first meeting in charge even as the new president signaled no plans to backstop the region's most vulnerable nations as the escalating debt crisis threatens to splinter the euro region.

"What makes you think that becoming the lender of last resort for governments is what you need to keep the euro region together?" Draghi asked reporters in Frankfurt today. "That is not really in the remit of the ECB. The remit of the ECB is maintaining price stability in the medium term."

ECB officials unanimously lowered the benchmark interest rate by 25 basis points to 1.25 percent, confounding 51 of 55 economists in a Bloomberg News survey. Only four predicted a quarter-point move and two expected a half-point reduction. Italian bond yields fell after the rate cut and the euro extended declines, dropping as much as 0.8 percent to $1.3657.

European leaders last night raised the prospect of the 17- member area breaking apart, with France and Germany saying they would treat Greece's surprise referendum on a second bailout as a vote on its euro membership. With the region's economic slowdown deepening and investors growing increasingly concerned, the ECB was under pressure to reverse this year's two rate increases.

David Fuller's view An Italian in charge of the European Central Bank must be a nightmare for Bundesbank officials.

National stereotypical quips of questionable taste aside, this was a sensible move by Mario Draghi, the ECB's new president. His predecessor's rate hikes were obviously a mistake as the euro region has drifted back into recession. The ECB's one remit is "maintaining price stability in the medium term" but it is now willing to err on the side of inflation to ease the euro region's bigger problem which is an absence of growth.

How might this rate decision affect the markets?

Stock markets like rate cuts, so today's rally is logical. It is also part of a new global trend as more countries are easing monetary policy and only a few such as India are still tightening…for now. This incremental change in monetary policy from equity headwind to tailwind is consistent with Fullermoney's view that we have seen the lows of the year for most stock markets, including all the important ones, and that the path of least resistance is now upwards more often than not.

I do not agree with some comments that today's rate cut is bearish for the euro because no one bought the single currency recently for its superior rate differentials. With a global desire for a second reserve currency, anything that helps the region to address its economic problems will be euro positive, although it is obviously still a fundamentally weak currency.

What about Europe's troubled sovereign debt markets? At least they offer a respectable yield, unlike the bonds of some other heavily indebted countries that I can think of. They also have a big new buyer - the European Financial Stability Facility. Arguably, the known problems have been largely priced in and they are not all insolvable.

What about the gold bullion market? It certainly likes interest rate cuts. Moreover, I have always said that higher short-term interest rates were most likely to end the gold bull market at some future point, just as they did in 1980. We will not have to worry about a repeat of that ending for a while.