The Dow rallied as financial stocks, led by Citigroup, continued to inspire blue chip gains. However, disappointment with second quarter results from the likes of Google and Microsoft caught up with technology plays and weighed on the NASDAQ.

The Dow added 49.91, or 0.44 per cent at 11496.57, while the S&P 500 edged 0.36 points, or 0.03 per cent higher to 1260.68. Meanwhile, the NASDAQ fell 29.52, or 1.28 per cent to 2282.78.

After market close on Thursday, Google reported second quarter earnings of US$1.25 billion, 35 per cent higher than last year's corresponding quarter but below consensus expectations. On Friday, Google shares fell 9.8 per cent.

Microsoft also disappointed with its US$4.3 billion second quarter income result falling short of expectations. Its shares closed 5.9 per cent lower.

Chipmaker AMD, which also missed estimates, contributed to the NASDAQ's weakness by dropping 12.3 per cent.

Meanwhile, IBM bucked the trend to gain 2.7 per cent. On Thursday, the technology giant posted earnings that beat analysts' expectations. The company cited the resilience of its international businesses.

Elsewhere in the sector, Intel added 0.5 per cent, Yahoo! was mostly flat and Apple, which reports earnings on Monday, fell 3.9 per cent.

Citigroup led the financial sector's gains. The banking giant beat Wall Street expectations with its US$2.5 billion quarterly loss. Shares rallied 7.7 per cent.

Elsewhere, Bank of America added 3.7 per cent, American Express was up 1 per cent, Lehman Brothers gained 1.1 per cent and Goldman Sachs tacked on 0.9 per cent.

Meanwhile, Merrill Lynch added 0.6 per cent. After market close on Thursday, the investment bank reported a loss of US$4.95 per share, which was far worse than analysts' expectations.

Fannie Mae and Freddie Mac continued to recover from recent losses. Fannie Mae jumped 22.6 per cent, while Freddie Mac rose 10.2 per cent despite reports that it was selling up to US$10 billion in new shares to raise capital.

The government sponsored lender filed a registration statement with the Securities and Exchange Commission for a possible stock offering.

Elsewhere, oil-field services provider Schlumberger said its second-quarter profit grew by almost 13 per cent, topping analysts' expectations. The company's shares closed 3.9 per cent higher Friday.

In other earnings news, Mattel said its second-quarter earnings fell by nearly 50 per cent due to lower demand and higher costs. The results still beat expectations, sending the toy makers shares 13 per cent higher.

Honeywell International shares fell 0.4 per cent even after the diversified manufacturer said second quarter earnings rose 18 per cent. The company also raised its full year forecast.

NYMEX light crude for August delivery fell US41c a barrel to settle at US$128.88. However, Exxon Mobil and Chevron defied the recent decline in crude prices and added 1.5 per cent and 0.4 per cent respectively.

COMEX gold for August delivery fell US$12.70 to settle at US$958 an ounce.

UK markets

British blue-chips advanced on Friday after better-than-expected results from US bank Citigroup spurred a rally in financial stocks. Meanwhile, a fall in base metals prices weighed on resource firms.

The FTSE 100 climbed 90.10, or 1.70 per cent to 5376.40.

Looking to the banks, Royal Bank of Scotland and Barclays both jumped around 10 per cent, while Lloyds TSB, Britain's largest provider of checking accounts, also rallied 10 per cent. Meanwhile, HSBC was up 3.7 per cent.

On the downside, miners fell in line with a drop in base metals prices. Xstrata lost 0.8 per cent, Kazakhys fell 2.9 per cent and Anglo American shed 1.1 per cent.

Among the Aussie majors, BHP Billiton lost 1.7 per cent and Rio Tinto fell 1.3 per cent in UK trade.

Homebuilders rallied with Taylor Wimpey up 8 per cent and Persimmon jumping 15.2 per cent. Meanwhile, Barratt Developments closed 20 per cent higher.

Wolseley, the world's biggest distributor of plumbing and heating gear, jumped 14 per cent.

Elsewhere, British Airways, Europe’s third largest airline, climbed 6.5 per cent. Carnival, the world's largest cruise-line company, rallied 8.5 per cent, while global hotel operator Intercontinental advanced 4.9 per cent.

European markets

European financial stocks ended sharply higher on Friday after better-than-expected earnings from US bank Citigroup lifted sentiment in the sector. Pharmaceutical stocks also helped drive gains.

The CAC 40 ended 73.37 or 1.74 per cent higher at 4299.36, while the DAX gained 111.38 or 1.78 per cent to 6382.65.

UBS jumped 7.6 per cent, Commerzbank rose 3.8 per cent, Deutsche Bank gained 1.5 per cent and insurance giant Allianz rallied 2.3 per cent.

L'Oreal fell 2.1 per cent after issuing a warning on sales. Nestle, a large shareholder in L'Oreal, dropped 2.8 per cent.

Stada rose 2.5 per cent, Sanofi-Aventis gained 2.1 per cent and Roche added 1.6 per cent.

Japanese markets

Japanese markets lost ground on Friday, closing their sixth consecutive weekly decline. Technology shares slid following disappointing results from Google, while worse than expected results from Merrill Lynch saw scepticism spread to other sectors.

The benchmark Nikkei 225 fell 84.25, or 0.65 per cent to 12803.70.

Among technology stocks, electronic parts maker Kyocera Corp dropped 2.4 per cent, while Fanuc and Tokyo Electron fell 1.4 per cent and 1.8 per cent respectively.

Looking to the financial sector, Mizuho Financial Group gave up 0.6 per cent, while Mitsubishi UFJ Financial and Daiwa Securities were both down 0.4 per cent. Nomura Holdings bucked the trend to tack on 0.2 per cent.

The recent decline in crude prices took its toll on oil-related firms. Mitsubishi Corp fell 2.5 per cent and fellow trader Mitsui & Co lost 1.7 per cent. Meanwhile Itochu Corp and Inpex Holdings fell 2.9 per cent and 3.4 per cent respectively.

Exporters were mixed with Toyota down 0.6 per cent, while Honda added 0.6 per cent. Sony dropped 1.8 per cent and Canon gave up 0.6 per cent.

Hong Kong markets

Hong Kong stocks ended higher on Friday after a volatile session ahead of US bank Citigroup's quarterly earnings. Gains in global lender HSBC Holdings and other blue chips offset losses among resource counters.

The Hang Seng rose 139.47 or 0.64 per cent to 21874.19.

HSBC climbed 2.6 per cent, leading gainers on the main index.

Elsewhere, offshore oil producer CNOOC slid 2.8 per cent, China Shenhua Energy fell 1 per cent and smaller rival Yanzhou Coal tumbled 6 per cent.

Local property stocks rallied with Sun Hung Kai Properties up 1.7 per cent. Hang Lung Properties adding 4.1 per cent after analysts said the sell-off among realty counters this year had exceeded the slowdown in the property market.

China Resources Enterprises, the nation's biggest brewer, fell 3.2 per cent after Credit Suisse downgraded the stock, citing near-term challenges for the company as global markets deteriorated.

The Overnight MarketWatch report is provided by SHAW Stockbroking's egoli - simple but informative market news for the everyday investor.

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