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RICHMOND (MarketWatch) – The surprising 200,000 net gain in December payrolls was “a heartening sign of a potential firming trend,” said Richmond Federal Reserve Bank President Jeffrey Lacker on Friday. In a speech to financial service professionals, Lacker said he expects only modest improvement in the economy in 2012, with economic growth expanding at a 2.0 to 2.5% pace. Lacker said the inflation outlook is “reasonably good right now” but said the risks were “tilted to the upside.” Still, there is a chance that inflation could fall well below the Fed’s implicit target of 2%, especially if global growth should soften enough to ease pressure on commodity prices. Lacker noted that the U.S. economy is now running on a lower-trend line than the 3% growth trend rate that persisted over the last century and a half. The over-built housing market “tops the list” of factors hampering the recovery, he said. And while much progress has been made in adjusting to the post-financial-crisis environment, the housing market still has “substantial adjustment” ahead.

SAN FRANCISCO (MarketWatch) — Ratings agency Standard & Poor’s is set to announce later Friday that it has cut France’s coveted triple-A rating, undermining euro-zone efforts to solve a persistent sovereign-debt crisis, according to media reports. French news agency Agence France Presse, citing an unnamed government source, reported on its website that S&P had already informed the French government of the move. Neither the ratings agency nor the French Finance Ministry would comment, AFP reported. Austria was also set to be downgraded, but fellow euro-zone countries Germany and the Netherlands reportedly were not to be downgraded. The euro fell to session lows after the report and recently traded at $1.2673, down 1.1%.

FRANKFURT (MarketWatch) — Negotiations on restructuring privately-held Greek government debt failed to produce a “constructive consolidated response by all parties” and have been suspended, negotiators representing Greece’s private-sector creditors said Friday in a statement. “Under the circumstances, discussions with Greece and the official sector are paused for reflection on the benefits of a voluntary approach,” said Charles Dallara, president of the Institute for International Finance, a banking lobby group, and Jean Lemierre of BNP Paribas, in a joint statement. The pair offered no date for the resumption of negotiations. European leaders agreed in October on a second bailout for Greece that would see private bondholders share the pain by taking a voluntary 50% haircut on the value of Greek bond holdings.

FRANKFURT (MarketWatch) — Ratings agency Standard & Poor’s could move as early as Friday to downgrade euro-zone countries, The Wall Street Journal reported, citing European Union sources. The euro extended losses and traded at $1.2702 versus the dollar, a loss of 0.9% from Thursday. European stock markets also turned lower, with the Stoxx 600 index down 0.5%.

FRANKFURT (MarketWatch) — Talks between Greece and private bondholders on a voluntary debt exchange failed to come to a conclusion on Friday and will likely resume on Wednesday, according to several news reports. Greek officials have been negotiating with representatives of the Institute of International Finance, a Washington-based group that represents international banks, in Athens. European leaders in October agreed to a second bailout plan for Greece but required private bondholders to bear part of the burden by agreeing to a restructuring that would write down the value of their Greek debt holdings by half.

WASHINGTON (MarketWatch) – After declining for four straight months, the U.S. trade deficit widened by 10.4% in November to $47.8 billion, the Commerce Department said Friday. This is the largest trade gap since June and the biggest jump in the deficit since May. The trade deficit was well above the consensus forecast of Wall Street economists of a deficit of $44.8 billion. The data may cause economists to trim their estimates for fourth quarter gross domestic product. The consensus forecast prior to the trade data was economic growth at a 3.2% annual rate in the fourth quarter, up from a 1.8% growth rate in the third quarter. Imports rose in November while exports declined. The U.S. trade deficit with China widened to $26.9 billion in compared with $25.1 billion in the same month last year. The government also revised the deficit in October down slightly to $43.3 billion from $43.5 billion.

WASHINGTON (MarketWatch) — The government will issue reports on the November trade deficit and December import prices at 8:30 a.m. Eastern. The deficit likely widened 3.0% to $44.8 billion in November from $43.5 billion in October, according to economists surveyed by MarketWatch. Import prices, meanwhile, are expected to rise 0.2% in December after they climbed 0.7% in November on rising fuel prices. This was the first rise in four months.

FRANKFURT (MarketWatch) — Italy on Friday sold 4.75 billion euros ($6.1 billion) of government bonds, news reports said, meeting the top end of its target range of 3 billion to 4.75 billion euros. Italy sold 3 billion euros of a November 2014 bond at a yield of 4.83%, down from 5.62% in a previous auction, reports said. Bids exceeded supply 1.22 times, down from 1.36 at the previous sale. Italy also sold 779 million euros of a July 2014 bond at a yield of 4.29% and 971 million euros of an August 2018 bond at a yield of 5.75%, reports said.

FRANKFURT (MarketWatch) — Spanish banks sharply increased borrowing from the European Central Bank in December to 134.8 billion euros ($173.4 billion) from 106 billion euros in November, according to data released by the Bank of Spain on Friday. The figure is the highest since July 2010. While Spanish banks reduced borrowing via the ECB’s main refinancing operations to 47.1 billion euros from 54.5 billion euros, the amount borrowed at longer-term refinancing operations jumped to 85.3 billion euros from 51.8 billion euros. That suggests Spanish banks were heavy users of the three-year loans offered by the ECB last month, analysts said. “A large chunk of this money will probably be used to meet near-term refinancing needs, but some of it is surely also being used to fund the Spanish sovereign, judging from the seemingly unrelenting rally in shorter-dated Spanish bonds,” said Martin Van Vliet, economist at ING Bank in Brussels.

LOS ANGELES (MarketWatch) — Chile’s central bank delivered an unexpected, quarter-percentage point interest-rate cut to 5% late Thursday, the first reduction since July 2009. Analysts polled by Dow Jones Newswires had expected, on average, the bank to hold the key rate at 5.25%. Policy makers at Banco Central de Chile noted in a statement a continued deceleration in emerging-market economies. It also highlighted that headline and core inflation in December was higher than expected because of prices for fresh and other foods, and pass-through from depreciation of the Chilean currency in the fourth quarter. Inflation expectations remain near the target, the bank said. The target stands at 3%.