LONDON (AP) — Concerns that Europe's debt crisis could drag down parts of the continent's banking system rattled most global markets Friday, though social network Facebook's imminent IPO buoyed sentiment on Wall Street.
Ratings agency Moody's downgraded 16 Spanish banks late Thursday, three days after downgrading Italy's, noting they are vulnerable to huge losses on government debt.
In Spain's case, the lenders are also exposed to tens of billions of euros (dollars) in soured investments in the country's imploded real estate market. Their bad loans have hit an 18-year high, according to new figures compiled by the Bank of Spain.
Worries over Spain were reignited in the past two weeks by the prospect that Greece might leave the 17-country euro union. Anti-bailout political parties made huge gains in general elections on May 6, though that ballot proved inconclusive. Another election will be held on June 17, and the radical left party Syriza is forecast to make gains, possibly becoming the biggest party.
Syriza rejects the international bailout — and the related austerity measures — that the former government negotiated.
But without that rescue package, Greece will likely default and have to leave the eurozone. That would result in financial disaster for Greece and send shockwaves through European markets, destabilizing other weak countries.
Fitch ratings agency downgraded Greece to the lowest possible grade for a country not in default on Thursday, noting that if the next elections do not produce a government that supports the bailout, Greece's exit from the eurozone "would be probable."
By midday in Europe, stock exchanges managed to slightly reverse their earlier losing streaks with Britain's FTSE 100 fell 0.5 percent to 5,311, Germany's DAX was up 0.4 percent to 6,333 and France's CAC-40 rose 0.6 percent to 3,030.
Spain's main stock index recovered 1.34 percent from heavy losses on Thursday, thanks mainly to a bounce back in the shares of state-controlled lender Bankia, which had plummeted on Thursday on reports of an increase in deposit withdrawals. They rose 22 percent on Friday, making up for a similar drop the previous day.
Wall Street looked set for a higher opening on Friday, when shares of social media giant Facebook will start trading. The company priced its IPO at $38 per share, at the top of expectations, and buyer demand is expected to be very strong.
Dow Jones industrial futures were up 0.4 percent to 12,466 and S&P 500 futures added 0.4 percent to 1,306.50.
In Asia, Japan's Nikkei 225 tumbled 3 percent to close at 8,611.31, its lowest finish in four months as signs of weakness in the U.S., a critical export market for Japanese companies, battered some of the country's behemoth manufacturers.
The Federal Reserve Bank of Philadelphia said its index of factory activity fell to minus 5.8 from 8.5 in April. Any reading below zero indicates contraction. Measures of new orders and employment also fell in May, the bank said. That suggests manufacturers in the region are cutting jobs.
Hong Kong's Hang Seng dropped 1.3 percent to 18,951.85 and Australia's S&P/ASX 200 slid 2.7 percent to 4,046.50. South Korea's Kospi tumbled 3.4 percent to 1,782.46. Benchmarks in Singapore, Taiwan and New Zealand also fell.
Mainland Chinese shares lost ground, with the benchmark Shanghai Composite Index losing 1.4 percent to 2,344.52. The Shenzhen Composite Index fell 1.5 percent to 940.91.
Benchmark oil for June delivery was up 5 cents to $92.61 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 25 cents to settle at $92.56 in New York on Thursday.
In currencies, the euro fell to $1.2707 from $1.2714 late Thursday in New York. The dollar rose slightly to 79.38 yen from 79.28 yen.
Pamela Sampson in Bangkok and Fu Ting in Shanghai contributed to this report.