Banks will be in the spotlight after ratings agency Moody's downgraded 15 of the world's biggest banks on Thursday, lowering credit ratings by one to three notches to reflect the risk of losses they face from volatile capital markets activities.

Morgan Stanley, one of the most closely watched firms in the much anticipated review, had its long-term debt rating lowered by just two notches, one level less than had been expected, sending its stock up sharply in after-hours trading.

European stocks lost ground in morning trade, led lower by cyclical firms such as BASF and BHP Billiton, as recent poor macroeconomic data raised concerns about the pace of global economic recovery.

The leaders of Germany, France, Italy and Spain will try to find common ground in Rome on Friday to restore confidence in the euro zone ahead of a full EU summit next week. High borrowing costs for Spain and Italy have recently eased on hopes for policy initiatives at the Brussels summit on June 28/29.

Spanish stocks bucked the trend on Friday, with the IBEX index gaining 1.4 percent after independent audits showed Spain's banks will need up to 62 billion euros ($78 billion) in capital needs under stressed economic conditions, lower than the 100 billion euro bailout fund Spain will receive to address its banking crisis.

Weakening business activity worldwide is hitting U.S. companies where it hurts, with more of them signaling disappointing results than at any time over the past decade.

Many bellwether companies, including two Dow components, have come out in recent days with profit warnings, and the slowing in Europe has been cited as a major factor for those outlooks.

Retail fund investors were net sellers of U.S.-domiciled equity funds, taking the opposite view of professional investors who were net buyers in the week ended June 20, data from Thomson Reuters Lipper showed on Thursday.

Mergers and acquisitions activity fell 25 percent worldwide in the first half of 2012 as global economic uncertainty reined in companies' expansion plans - and bankers don't expect much improvement over the rest of the year.

Best Buy Co Inc's acting CEO promised on Thursday to tackle the unwieldy size of the world's largest consumer electronics chain, just months after investors gave a thumbs-down to its restructuring efforts.

Logistics company Ryder Systems Inc cut its quarterly earnings forecast, citing lower demand for its commercial rental services.

Private equity fund Carlyle Group is in talks with banks to refinance A$1.9 billion ($1.9 billion) in loans used to buy out Australian equipment hire company Coates Hire Ltd, two sources familiar with the matter told Reuters.

(Reporting by Blaise Robinson)

• A Permanent Economic Emergency