Stock market fallout from Spain downgrade? Quiet.

Stock market reaction muted in Germany, France, Britain, and US. First estimate of US GDP in first quarter could sway stock market sentiment.

A downgrade of Spain's debt and another increase in the country's unemployment rate kept sentiment in financial markets in check Friday ahead of the first estimate of U.S. economic growth in the first quarter of the year.

Spain's economic problems have become the epicenter Europe's debt crisis in recent weeks as investors worry over Spain's ability to push through austerity and reforms at a time of recession and mass unemployment.

On the unemployment front, there was some further grim news with the national statistics agency reporting that the jobless rate jumped to 24.4 percent in the first quarter of 2012 — the highest rate in the 17-country eurozone — from 22.9 percent in the fourth quarter of 2011.

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The figures came just hours after Standard & Poor's became the first of the three leading credit rating agencies to strip Spain of an A rating. It cited a worsening budget deficit, worries over the banking system and poor economic prospects for its decision to reduce the rating by two notches from A to BBB+. It even warned that a further downgrade is possible as it left its outlook assessment on Spain at "negative."

With the economy shrinking and the population restless, markets have recently grown concerned that the government will not meet its targets and will be forced into seeking a financial rescue as Greece, Ireland and Portugal have done before.

Markets across Europe initially reacted negatively to the twin news but soon recovered their poise as the downgrade was largely viewed as a belated acknowledgment of the market realities.

"As so often with downgrades, this is no more than a restatement of what we already expect, so the actual impact has been fairly muted," said David Jones, chief market strategist at IG Index. "The other agencies are likely to follow suit, but these moves will be of even less moment than S&P's."

In Europe, the FTSE 100 index of leading British shares was up 0.2 percent at 5,761 while Germany's DAX rose 0.1 percent to 6,744. The CAC-40 in France was 0.3 percent higher at 3,238. Even Spain's IBEX index was 0.4 percent higher.

The euro also eked out a 0.4 percent rise to $1.3232, having initially fallen on the bad Spanish news.

Wall Street was poised for a flat opening with Dow futures and S&P 500 futures down 0.1 percent.

How markets trade over the rest of the day could well hinge on the first estimate for first-quarter U.S. economic growth, which is released an hour before Wall Street opens. The consensus in the markets is that the U.S. economy grew by an annualized rate of around 2.5 percent. That would represent a decline on the 3 percent rate recorded in the final quarter of 2011 but would be considered a fairly decent outcome given the problems in the global economy, particularly in Europe.

Earlier in Asia, key benchmarks gave up early gains to close lower. Japan's Nikkei 225 index fell 0.4 percent to close at 9,520.89 after briefly jumping 1 percent after the Bank of Japan said it will expand its asset-buying program to help support the economy.

Hong Kong's Hang Seng fell 0.3 percent to 20,741.45 while in mainland China, the benchmark Shanghai Composite Index slipped 0.4 percent to 2,396.32 and the Shenzhen Composite Index lost 0.3 percent to 940.35.

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