BANGKOK – Asian stock markets fell Monday, with slower-than-expected growth in the U.S. and uncertainty about a tentative deal to resolve Greece’s debt crisis weighing on investor sentiment.

Japan’s Nikkei 225 index fell 0.7 percent to 8,781.92. South Korea’s Kospi was 0.7 percent lower at 1,951.23 and Hong Kong’s Hang Seng dropped 0.5 percent to 10,394.33. Australia’s S&P/ASX 200 lost 0.3 percent at 4,274.70.

Benchmarks in Singapore and the Philippines also fell. Shares in mainland China were mixed after being closed for a week for Chinese New Year holidays. Taiwan and New Zealand rose.

European leaders were to meet later Monday in Brussels to discuss austerity and belt-tightening measures as well as a tentative deal reached Saturday between Greece and its private investors that could avert a disastrous Greek default on its debt.

If the deal holds and works, it will help prevent a potential shock to the world banking system. But it doesn’t resolve the weakening economic conditions in Greece and other European nations as they rein in spending to get their debts under control.

Stan Shamu of IG Markets in Melbourne said that “the Greece debt issues will remain a source of uncertainty and might dampen the risk mood ahead of the EU summit today.”

Under the agreement, investors holding 206 billion euros ($272 billion) in Greek bonds would exchange them for bonds with half the face value. The replacement bonds would have a longer maturity and pay a lower interest rate.

The deal would reduce Greece’s annual interest expense from about 10 billion euros to about 4 billion euros. When the bonds mature, Greece would have to pay its bondholders only 103 billion euro.

It is unclear how investors who buy and sell the bonds of other debt-burdened countries, such as Italy, Spain and Portugal, will react. If they drive up borrowing costs for those countries, the debt crisis could get worse.

Private investors hold two-thirds of Greece’s debt, which is equal to an unsustainable 160 percent of its annual economic output. By restructuring the debt, Greece hopes to make it a more manageable 120 percent by decade’s end.

On Wall Street, stocks mostly fell Friday after the government said the U.S. economy grew more slowly than expected in the last three months of 2011.

Economic growth for October through December came in at an annual rate of 2.8 percent. That was the fastest of 2011 but lower than the 3 percent that economists were looking for.

The Dow Jones industrial average fell 0.6 percent to 12,660.46. The Standard & Poor’s 500 index fell 0.2 percent to 1,316.33. The Nasdaq composite rose 0.4 percent to 2,816.55.

Benchmark oil for March delivery was down 36 cents to $99.20 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell 14 cents to end at $99.56 per barrel on the Nymex on Friday.

In currencies, the euro fell to $1.3180 from $1.3208 late Friday in New York. The dollar rose slightly to 76.74 yen from 76.72 yen.

LONDON – A strong U.S. jobs report boosted world financial markets on Friday, although nagging worries about Europe’s debt crisis pushed the euro currency to a new 17-month low against the dollar.

The U.S. Labor Department said employers added 200,000 jobs in December, pushing the unemployment rate down to 8.5 percent, the lowest since February 2009. The rate has dropped for four straight months. The job gains cap a six-month stretch in which the U.S. economy generated 100,000 jobs or more in each month — something that hasn’t happened since April 2006.

An improvement in the U.S. labor market is crucial for global markets because American consumer spending accounts for a fifth of the world’s economic activity. A recovery in the U.S. would also mitigate the impact of the sharp slowdown in Europe.

Longer-term concerns about the euro and the region’s financial system pushed the euro currency to a 17-month low on Friday — the euro lost another 0.6 percent Friday to $1.2724, the weakest since July 2010.

European market indexes, which had opened higher on hopes for upbeat U.S. data, rose further. Britain’s FTSE 100 rose 0.4 percent to 5,644.55, while Germany’s DAX rose 0.6 percent to 6,131.25. France’s CAC-40 rose 0.8 percent to 3,170.85.

Wall Street was also expected to gain on the open, with Dow futures up 0.4 percent at 12,374 and S&P 500 futures 0.5 percent higher at 1,279.40.

Asian market indexes closed lower, reacting to the poor economic and financial indicators out of Europe the previous day.

That stream of poor European data continued Friday, with a drop in retail sales and economic sentiment among consumers and businesses during the key spending month of December. Unemployment in the 17-nation eurozone also remained at a worrying 10.3 percent and could worsen as the region slides back toward recession.

Even strong economies like Germany were being affected by the gloom generated by the debt crisis. Industrial orders in Germany dropped sharply in November as demand from abroad dropped, nearly erasing a strong gain from the previous month. Orders were down 4.8 percent compared to the previous month, the Economy Ministry reported Friday. In October, orders rose 5 percent.

Italy’s benchmark 10-year bond yield edged further above 7 percent, a borrowing rate that is considered unsustainable over the longer term.

Italy, along with many other European governments, has to roll over huge amounts of debt in coming months. It is trying to restore investor confidence in its public finances to get those bond yields down and pay lower rates when it raises cash from capital markets.

Traders were also watching for comments from Italian Premier Mario Monti, who was holding talks Friday in Paris with French President Nicolas Sarkozy.

European Banks, meanwhile, are hurting due to fears that they will take big losses on their holdings of government debt and will struggle to raise new cash to plug those holes.

Trading in UniCredit, Italy’s largest bank, was halted for the second straight day Thursday after the stock lost a quarter of its value in two days. The bank says it would need to offer huge discounts to investors to raise money in a new share sale. The stock was down 2 percent Friday after temporarily dropping 11 percent.

Outside the eurozone, Hungary slid deeper into its own financial crisis. The Fitch Ratings agency downgraded Hungary’s credit grade by a notch to BB+ — junk status — citing the country’s disagreements with the EU and IMF over conditions linked to rescue loans.

Hungary had to pay a staggeringly high interest rate of 10 percent on its 12-month debt in an auction Thursday, an indication it is losing investors’ trust.

In Asian, stocks ended mostly lower as they reacted to the previous day’s European market jitters. Japan’s Nikkei 225 Index closed 1.2 percent lower at 8,390.35. Hong Kong’s Hang Seng index fell 1.2 percent at 18,593.06 and South Korea’s Kospi fell 1.1 percent to 1,843.14. Benchmarks in Taiwan and Indonesia also fell. India and Singapore rose.

In mainland China, the benchmark Shanghai Composite Index gained 0.7 percent to 2,163.39, while the smaller Shenzhen Composite Index gained 0.5 percent to 817.78.

Japanese stocks are hurt by the yen’s rise against the dollar, which makes exports less competitive internationally. On Friday, the dollar was steady around 77.10 yen.

Benchmark oil for February delivery rose 67 cents to $102.48 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell by $1.41 to end Thursday at $101.81 in New York.

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Pamela Sampson in Bangkok contributed to this report.

NEW YORK (Reuters) – With two weeks left in the trading year, the euro zone debt crisis will remain the primary impediment to pushing the S&P 500 index into positive territory for 2011.

Uncertainty over progress in the region, along with the potential for credit rating downgrades on euro zone countries, have kept investors on edge and market volatility high.

Even with a fairly busy U.S. economic calendar, which includes a batch of data on the housing market, the final reading on gross domestic product and durable goods orders, markets will focus on developments from Europe.

"What everybody is going to look at is the same thing they've been looking at — every time a German official opens their mouth we get crushed," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"I'm keeping my fingers crossed that Santa Claus is out there. But we've got to see something."

The benchmark S&P 500 index (.SPX)(.INX) is down about 3 percent for the year and would need to climb above 1,257.64 in order to end higher for the year.

A rally by stocks on Friday fizzled, and the market ended with only modest gains after the latest credit warning about possible downgrades of European nations. For the week, the Dow fell 2.7 percent, the S&P lost 2.9 percent and the Nasdaq was down 3.5 percent.

Italy's prime minister urged European policymakers on Friday to beware of dividing the continent in the effort to contain the debt crisis, warning against a "short-term hunger for rigor" in some countries, in a swipe at Germany.

Stocks have been whipsawed as investors weigh the threat from the euro zone crisis against modest improvement in U.S. economic data and stocks that many regard as cheap.

"There do appear to be some improving economic indicators domestically, but it's hard to see how they win the day if Europe continues to be a big concern. It's not like the valuations are at such bargain-basement prices that it becomes a one-way bet," said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.

As volumes begin to dry up and market moves become more exaggerated during the holiday period, the volatility may help lift the stock market into the plus column.

CHANCE OF RALLY

"Can you see an upside rally? Certainly, because you are going to have some asset managers in the end who are going to try and just push it so the market ends at the very least flat on the year, if not higher," said Ken Polcari, managing director at ICAP Equities in New York.

"If there is going to be a rally at all, it will happen on light volume because there will be fewer and fewer participants. When there is less volume, you do have the ability to have those exaggerated moves, but people will take advantage of that."

Volatility in individual shares could also be affected by corporate earnings preannouncements. There have been 97 negative earnings preannouncements issued by S&P 500 corporations for the fourth quarter, compared to 26 positive preannouncements, resulting in a negative-to-positive ratio of 3.7. That's the highest in 10 years, according to Thomson Reuters data.

Companies that have provided outlooks in recent weeks include DuPont (DD.N), Intel Corp (INTC.O), United Technologies Corp (UTX.N) and Texas Instruments Inc (TXN.N).

Unexpected management shakeups could also be on the horizon and increase the tumult in stocks. Both Cablevision Systems Corp (CVC.N) and the New York Times Co (NYT.N) saw high-level executives suddenly leave their posts.

But stock movements next week will ultimately be dictated by actions taken in Europe, with the light volume exacerbating market swings.

"The only thing that is going to be of any interest is certainly the continuing headlines on Europe, whether or not they come any closer to what looks like a potential agreement," said Polcari.

"You may get a little bit of a push to the 1,250 to 1,270 range, but much beyond that I don't see why it would go any higher unless you get some explosive announcement out of Europe."

(Reporting By Chuck Mikolajczak; Editing by Kenneth Barry)