NEW YORK (Reuters) - Government debt prices rose and stock markets around the world wavered on Friday when disappointing earnings results from Microsoft and Google gave investors pause after a recent string of gains that lifted major U.S. equity indexes to record levels.

In a move that could help support its economy, China's central bank removed controls on bank lending rates, signaling the new leadership's determination to carry out market-oriented reforms.

Market reaction was muted, but China is seen as a primary source of revenue growth by the world's largest multinationals.

U.S. stocks were supported by General Electric Co and others that beat quarterly profit expectations, helping lift the benchmark S&P 500 index to another record closing high.

Of the 104 companies in the S&P 500 that have posted results so far for the second quarter, 65.4 percent have reported profit above expectations, a rate slightly above recent quarters.

The S&P 500 and Dow posted their fourth straight week of gains, lifted by reassurances this week that the Federal Reserve would be flexible about when it ends monetary stimulus.

The S&P 500 index had advanced in 10 of the past 12 sessions, setting record highs, including all-time intra-day and closing highs on Thursday. The benchmark pared initial losses to close higher on Friday, as did a measure of global stocks.

"The sentiment of the market is that after a great run on the back of Bernanke's comments and decent earnings, we're consolidating a little bit," said Lucas Roux de Luze, sales trader at TJM Partners, in London.

The Nasdaq fared worse than the other two major U.S. indexes, falling 0.66 percent after Microsoft Corp and Google Inc both reported results that fell short of expectations.

European shares ended flat but chalked up a fourth straight week of gains on Friday. Emerging market stocks fell 0.7 percent.

MSCI's all-country world index rebounded, rising 0.07 percent. The pan-European FTSEurofirst 300 of leading regional shares fell 0.01 percent to close at 1,209.00.

The Dow Jones industrial average closed down 4.80 points, or 0.03 percent, at 15,543.74, but the S&P 500 gained 2.72 points, or 0.16 percent, to 1,692.09. The Nasdaq composite dropped 23.66 points, or 0.66 percent, to 3,587.61.

For the week, the Dow rose 0.5 percent, the S&P added 0.7 percent and the Nasdaq fell 0.3 percent.

Sentiment was bolstered by long-awaited lending changes in China designed to boost its flagging growth. The People's Bank of China said it was removing its floor on lending rates for commercial banks, meaning they will now be able to cut rates as much as they see fit to attract borrowers.

Economists have been optimistic about U.S. growth prospects for some time, but some are now starting to become increasingly upbeat about Europe, too.

"Our biggest overweight is still the U.S., that story is just getting better and better, but what has surprised many externally and internally is that we have just gone overweight on Europe," said UBS global macro strategist Ramin Nakisa.

"The biggest acceleration of any region we look at is in Europe at the moment. Emerging markets are slowing down, whereas Europe is picking up, so you can't wait for the GDP figures because they are always backward looking."

The 10-year U.S. Treasury was up 14/32 in price to yield 2.4821 percent.

The U.S. municipal bond market fell sharply on Friday, a day after Detroit filed for the largest municipal bankruptcy in history.

German Bund futures settled down 1 tick at 144.22 after earlier touching a session low of 143.99 following the lending changes in China.

The euro rose 0.25 percent to $1.3142, while the dollar index was down 0.29 percent at 82.583.

The dollar hit a one-week high of 100.86 yen, according to Reuters data, before pulling back slightly to trade down 0.01 percent at 100.39 yen.

U.S. crude briefly traded at a premium to the global benchmark, Brent crude, for the first time since October 2010 as the latter market fell sharply while better demand for U.S. crude supported the domestic market.

Brent for September settled down 63 cents at $108.07, while U.S. oil for September rose 1 cent to settle at $108.05 a barrel.

After a steady week for commodities, gold rose 0.8 percent.

(Editing by Chizu Nomiyama and Dan Grebler)

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