From Morrison Securities Pty. Ltd.

U.S. STOCK MARKETS

U.S. stocks fell Friday, but squeaked out an advance for the week, as fears of a credit downgrade of several euro-zone countries added to disappointing results from J.P. Morgan Chase.

The Dow Jones Industrial Average finished down 48.96 points, or 0.39%, to 12422.06, after tumbling as many as 159 points. The Standard & Poor's 500-stock index dropped 6.41 points, or 0.49%, to 1289.09, while the Nasdaq Composite declined 14.03 points, or 0.51%, to 2710.67.

The declines came after reports that credit-rating firm Standard & Poor's could downgrade several euro-zone governments, including France. After U.S. markets closed, S&P said it lowered ratings on a number of European countries, including France, Italy and Spain.

In a separate blow to confidence, talks to restructure privately held Greek debt didn't reach a conclusion Friday and are suspended. The negotiations had been expected to reach a conclusion in the coming week. The downgrade concerns added to a cautious investor outlook after a string of steady stock gains this week, and come after J.P. Morgan's revenue disappointment earlier Friday.

Shares of the blue-chip financial giant dropped 93 cents, or 2.5%, to $35.92 after the company reported fourth-quarter revenue that fell short of expectations; earnings declined but matched forecasts. Bank of America was even weaker, losing 18 cents, or 2.7%, to 6.61 to lead the Dow decliners after The Wall Street Journal reported that the bank was willing to retreat from some parts of the country if its financial problems deepen.

The weakness at the two banks weighed on financial stocks. Industrial and technology stocks also finished lower. Intel dropped 61 cents, or 2.4%, to 25.14, and United Technologies gave up 1.16, or 1.5%, to 76.08. All 10 S&P 500 sectors finished in negative territory. U.S. markets are closed Monday for Martin Luther King Jr. day.

EUROPEAN STOCK MARKETS

European stock markets dropped Friday after media reports that ratings agency Standard & Poor's may downgrade several euro-zone nations, including France.

The pan-European Stoxx 600 index fell 0.1% to end at 249.18 on Friday, but posted a weekly gain of 0.7%. Stocks headed south after The Wall Street Journal reported that S&P could downgrade some states in the euro area as soon as Friday, though there was no official confirmation of this from the ratings company.

Separately, French news agency Agence France-Presse, citing an unnamed government source, reported that S&P had already informed the French government of its intention to downgrade France. Speculation about a potential downgrade of France has haunted the markets for several weeks.

Losses for the French market Friday were limited, with the CAC 40 falling 0.1% to 3,196.49. Oil-field-services company Technip SA dropped 2.4% and was the biggest loser in the CAC-40, while shares of banking group BNP Paribas SA rose 2.5% and those of rival Societe Generale SA gained 0.3%.

Some German bank shares also advanced; Commerzbank AG rallied 3.4% and Deutsche Bank AG gained 1.5%. Still, Germany's DAX 30 index slipped 0.6% to 6,143.08 and the U.K.'s FTSE 100 index fell 0.5% to 5,636.64. The Italian FTSE MIB index fell 1.2% to 15,011.09.

Earlier in the session, Italy successfully sold EUR4.75 billion in government bonds, meeting the top end of its target range. Yields on both maturities on sale came down compared with previous auctions, lowering borrowing costs for the currency bloc's third-largest economy.

In the secondary market, yields on benchmark 10-year Italian government bonds went up 16 basis points to 6.68%, after shedding 26 basis points Thursday. On a more down note, U.K. software firm Invensys PLC sank more than 19%, posting the biggest loss in the Stoxx 600 index. The company warned Friday that its annual operating profit will be significantly lower than last year, and cited contract delays in China and extra costs related to its rail business as reasons.

ASIA-PACIFIC MARKETS
Most Asian markets rose Friday as successful Italian and Spanish bond auctions and comments from the European Central Bank helped alleviate concerns about the region's debt crisis.

Mainland Chinese stocks, which tumbled after data showing a drop in fourth-quarter foreign exchange reserves, were a notable exception. Japan's Nikkei Stock Average jumped 1.4%, South Korea's Kospi gained 0.6%, and Hong Kong's Hang Seng Index gained 0.6%.

On mainland Chinese bourses, the Shanghai Composite Index fell 1.3%, while the Shenzhen Composite Index plunged 3.5%. Taiwan's Taiex slipped 0.1% on caution ahead of Presidential elections over the weekend. Several mining and metals shares climbed in Asia after a softer dollar pushed commodity prices higher Thursday.

Shares of Pacific Metals jumped 4.5% in Tokyo and Korea Zinc climbed 3.6% in Seoul. In Hong Kong, Aluminum Corp. of China added 2.2% and Maanshan Iron & Steel gained 3.5%. Shares of Inpex Corp. climbed 1.2% after the Japanese energy producers and French partner Total SA gave the go-ahead to a massive $34 billion Ichthys natural gas-export project in Australia.

Many of the region's exporters also climbed, with those in Japan rising as the euro climbed above the Y98 level. Honda Motor rose 3.4% and Sharp Corp. closed 2% higher. Mainland Chinese stocks fell sharply after data showed the country's foreign-exchange reserves fell by $20.6 billion in the fourth quarter to $3.18 trillion amid a shrinking trade surplus and worries about capital outflows. Shares of Anhui Conch Cement dropped 4.6%, electrical appliances distributor Qingdao Haier fell 4.3% and SAIC Motor declined 3.9%.

COMMODITIES
Base metals closed mostly lower on the London Metal Exchange Friday as investors fretted over the possibility of an imminent downgrade for several euro-zone nations, driving risk assets into the red. LME three-month copper closed down 0.1% at $8,000 a metric ton, while three-month aluminum ended the session 0.8% lower at $2,144/ton.

Crude futures fell Friday in tandem with a slumping euro as Standard & Poor's prepared to downgrade France's credit rating, adding new fears about Europe's economy.

The news of imminent downgrades renewed worries about a potential stumbling block for the global economy, and oil demand. Traders quickly switched gears to focus on Europe's credit crisis after a sell-off Thursday was sparked by potential delays to the E.U. embargo on Iranian oil.

Light, sweet crude for February delivery settled 40 cents, or 0.4%, lower at $98.70 a barrel on the New York Mercantile Exchange, after falling as low as $97.70 a barrel earlier in the session. Gold prices fell for the first time in four days as cautious investors moved to the sidelines over concerns about credit-ratings downgrades in the euro zone. The most actively traded gold contract, for February delivery, fell $16.90, or 1%, to settle at $1,630.80 a troy ounce on the Comex division of the New York Mercantile Exchange.