Good Morning,

The ECB signed on to the global rate-slashing campaign this morning by offering a half-percent chop of its own. The cut was in line with analyst expectations, but it also revealed internal discord at the central bank, much like the brewing battle of the hawks and doves at the Fed we reported yesterday. Facts are facts however, and the eurozone industrial output has swiftly gone from a -0.4% figure last June, to a -7.7% showing as of November.

Thus, the ECB took a big step in December by wielding a big knife and cutting 75 bp off its key lending rate. The euro already traded at a five-week low ahead of the rate cut announcement, but the dollar picked up steam against the common currency following the news. At last check, the greenback was at 84.43 on the index, and at 1.3086 against the euro. Oil prices drifted in the mid-$37 range and their prospects for large gains appeared low at the moment. More and more firms (Morgan Stanley, Citi, Royal Dutch Shell) are sitting on black gold in storage on supertankers.

Gold markets in New York opened on a nervous note in the wake of the (largely expected) ECB news. Gold was up only a dime, at $810.20 per ounce, as players digested the near-term market fallout from the rate cut as regards the US dollar, the price of oil, and the outlook for commodities in general. Silver was down a dime, quoted at $10.45, while platinum continued to give back portions of its previous gains, losing $23 to $906 and palladium was off by $6 to $175 per ounce. Bullion was seen as largely steady at least until Mr. Trichet offers a jawboning session later this morning. Support near $800-$805 needs to hold at this time, lest the metal heads for a repeat visit of the $775 value zone. The only bright news item of the day thus far has been the Israel-Hamas cease-fire talks taking place in Cairo.

Judging by today's shave and a haircut, economic conditions have not yet made it into the comfort zone over in the Old World. As things stand after the adjustment, the ECB still has the highest lending rate among the big central banks. Room remains for further tweaks this year, as hardly anyone expects a quick u-turn in the regional economy in 2009. The general picture is agonizingly weak, with new car sales slumping, inflation rates slowing to a two-year low, and an implosion of epic proportions in Spain's formerly red-hot real estate market.

But, hey, who is to say that the landscape is much better over in the US? Not the headlines that show JP Morgan Chase's profits falling 75% to a puny (for it) $700 million net in Q4, or the ones that reveal opaque treatment of shareholders by Apple in the wake of its founder's health condition. Or, for that matter the news that B of A could use more billions on top of the 25 it already has received to help digest its Merrill purchase. Quite a costly Tums tablet, eh? You just know things are bad all over when Google (!) announces job cuts.

Today's cherry on top of the US economic and financial news sundae comes from exactly where you would expect it: real estate. US foreclosures rose 81% last year, to a number exceeding 2.3 million. Nevada and Florida lead the funeral march of overinflated properties falling into default. Built on easy (and that's an understatement) credit, the US real estate house of cards could yield another 5 to 8 million foreclosures over the next 46 months in the opinion of real estate experts.

US PPI numbers fell 1.9% last month, for a fifth straight month, while initial jobless claims were up by 54,000 last week amid continuing claims of 4.5 million. These stats, along with the factored-in ECB rate cuts could give the dollar some difficulty in making immediate further progress and therefore gold could benefit from a bit of a boost in the session, but the going will not be very easy. Resistance now looms where previous supports were taken out.

Until later,