Wall Street closed mostly higher on Friday even as a weak labour market report added to concerns about the economy. On Sunday, the Treasury Department said it would take control of Fannie Mae and Freddie Mac, the biggest government bailout in US history. Friday’s housing market data dashed hopes of a near term recovery. The Mortgage Bankers Association found that a record 1.25 million homes were in foreclosure during the second quarter of 2008.

Meanwhile, the unemployment rate rose to a five-year high of 6.1 per cent in August. Economists had forecast the unemployment rate would hold steady at July levels of 5.7 per cent.

However, the market's response to the economic data was muted, especially in comparison to Thursday’s broad based retreat.

The Dow gained 32.73, or 0.29 per cent to 11220.96, while the broader S&P 500 added 5.48, or 0.44 per cent to 1242.31. The NASDAQ was down 3.16, or 0.14 per cent at 2255.88.

The financial sector helped drive gains. Bank of America climbed 5.3 per cent, Citigroup was up 4.2 per cent and JPMorgan added 4.5 per cent. American Express and American International Group rallied 1.7 per cent and 5.3 per cent respectively.

Merrill Lynch added 2 per cent even after Goldman Sachs downgraded the company to a sell, citing the potential for further mortgage related write downs.

Meanwhile, Goldman Sachs picked up 1.5 per cent.

Fannie Mae jumped 9.7 per cent and Freddie Mac climbed 3 per cent on Friday, but both slumped in after hours trade due to speculation about an imminent government takeover.

On Sunday, the government announced the bailout of the two mortgage giants. Under the Treasury’s plan, the government would run both companies and invest up to US$100 billion in each. In addition, the current chief executives would be replaced.

The Treasury said stock in the companies would continue to trade, but powers of shareholders would be suspended until government control ends.

The plan is expected to pressure Fannie and Freddie’s shares, but strengthen the housing market and broader financial sector.

Energy firms fell as crude prices continued to soften. NYMEX light crude for October delivery fell US$1.66 to settle at US$106.23 a barrel.

Exxon Mobil and Chevron lost 0.7 per cent and 1.2 per cent respectively.

Meanwhile, COMEX gold for December delivery fell US40c to settle at US$802.80 an ounce.

Elsewhere, Nokia shed 7.6 per cent after warning that third quarter sales would come in below the previous quarter’s result. The company said it was taking a hit from economic weakness and a drop in consumer spending.

Apple fell 0.7 per cent, Research in Motion was down 0.5 per cent, Microsoft gave up 2.3 per cent and Google lost 1.3 per cent.

Dell bucked the trend to edge 0.3 per cent higher on reports that it was looking to sell some or of its PC-manufacturing plants in order to cut costs.

UK markets

British stocks continued their downward spiral on Friday to fall 7 per cent for the week, their largest in six years. Miners were the worst performers and banks extended losses in afternoon trade on news the US jobless rate jumped in August.

The FTSE 100 closed 121.40, or 2.26 per cent lower at 5240.70.

Shares of HBOS fell 6.8 per cent, while other banks also lost ground in the afternoon. HSBC Holdings declined 3.3 per cent and Lloyds TSB shed 5.7 per cent.

Mining stocks took a hit from falling copper prices. Aussies Rio Tinto and BHP Billiton were down 3.5 per cent and 3.2 per cent respectively. Anglo American was hurt 5.2 per cent and Eurasian Natural Resources shed 7.6 per cent.

Ukrainian iron ore miner Ferrexpo slumped 7.1 per cent as investors worried about the growing political tensions in Ukraine.

Platinum specialist and car catalyst maker Johnson Matthey tumbled 8.5 per cent after being cut from the buy list of Merrill Lynch.

Lonmin sank 4.2 per cent on talk that Xstrata had rejected an offer to buy a block of shares in the platinum miner at 33 pound per share, the same price as its hostile bid. Xstrata was down 5.6 per cent.

With oil trading near a five-month low, BP lost 1.2 per cent and Shell gave up 3.4 per cent, while Tullow Oil bucked the trend to rise 0.9 per cent.

Imperial Energy rose 2.2 per cent after India’s petroleum minister said he hoped ONGC’s takeover could be completed within four to five weeks.

Unilever advanced 6.1 per cent after it named Paul Polman as its new chief executive, replacing Patrick Cescau.

Cadbury added 2.3 per cent on talk the confectionery group had appointed one of its global advisers, UBS, to sell off its Australian drinks business with analysts valuing the unit at around 600 million pounds.

Tech stocks were worse for wear with Vodafone down 4.5 per cent after mobile phone maker Nokia warned that the soft global economy, tough competition and a weak handset portfolio would hit its market share in the third quarter.

European markets

European shares sank on Friday with industrials and technology stocks leading losses. Banks were again out of favour and oil stocks struggled.

Germany’s DAX dropped 152.13, or 2.42 per cent to 6127.44, while France’s CAC 40 slipped 107.35, or 2.49 per cent to 4196.66.

A profit warning from Nokia saw its stocks close 9.6 per cent lower. The mobile phone maker said its market share would fall in the third quarter.

Nokia’s suppliers were also hurt by the news. STMicroelectronics was 5.6 per cent lower and competitor Ericsson fell 5 per cent. Siemens was down 5.6 per cent.

Phone operators were also struggling with Sweden’s TeliaSonera falling 4.5 per cent and Deutsche Telecom down 2.5 per cent.

Oil companies fell in line with the softening crude price. Norway’s StatoilHydro lost 15.6 per cent, while Portugal’s Galp Energia dropped 14.6 per cent.

In the banking sector Spain’s Banco Popular lost 6.8 per cent, Banesto fell 6.1 per cent and BBVA dropped 3.5 per cent. France’s Societe Generale slid 5.4 per cent after Deutsche Bank raise concerns over worsening credit conditions.

Japanese markets

Japanese shares fell 2.8 per cent to a five month closing low on Friday, as the market was sprung with a broad sell-off. The decline was spurred by negative data out of the US, and growing concerns over the economy.

The benchmark Nikkei 225 fell 345.43 points, or 2.8 per cent to 12212.23.

Silicon wafer maker Sumco sank 11.3 per cent, becoming the biggest percentage loser on the Nikkei after a brokerage downgrade.

Sony lost 4.2 per cent, as the consumer electronics maker said it would recall 438,000 Vaio portable computers due to possible overheating that could burn users.

Financials were among the biggest losers, Mizuho and Mitsubishi UFJ shed 6.4 per cent and 5.4 per cent respectively.

Hong Kong markets

Hong Kong investors saw shares fall to a 17 month low, as the main index’s 2007 gains were completely wiped out. Property stocks recorded their biggest single-day fall in six months on broker downgrades.

The benchmark Hang Seng Index fell 456.20 points or 2.2 per cent at 19933.28.

China’s largest real estate developer, Sun Hung Kai Properties fell 6.1 per cent after Goldman Sachs downgraded the stock to neutral from buy. The brokerage also cut its rating on Henderson Land sending the stock price down 6.2 per cent.

HSBC Holdings shed 3.3 per cent due to negative US sentiment.

Weaker oil prices saw PetroChina drop 2.6 per cent.

Bucking the trend was Esprit adding 1.9 per cent. Merrill Lynch upgraded the stock to buy from underperform on Thursday.

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

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