By Riva Gold 

Global stocks fell Friday, as a steep drop in Chinese equities put a halt to Europe's rally.

The Stoxx Europe 600 was down 0.5% in early trade, weighed by losses in the basic resources sector, after hitting a three-month high on Thursday.

"China spooked markets quite a bit over the summer and now we see it again," said Philippe Gijsels, chief strategist at BNP Paribas Fortis, pointing to weakness in the Chinese manufacturing sector.

Asian markets sold off as investigations into two major Chinese brokerages and a drop in Chinese industrial profits sent the Shanghai Composite Index down 5.5%.

Hong Kong's Hang Seng Index lost 1.8%, while Japan's Nikkei Stock Average fell 0.3%.

U.S. financial markets were closed Thursday for the Thanksgiving Holiday and will close early on Friday in what is expected to be a light trading session.

In currencies, the euro was up 0.06% against the dollar at $1.0613.

The dollar was down 0.16% against the yen at Yen122.4270 after another fall in Japanese consumer prices raised hopes for more stimulus from the Bank of Japan.

In commodities, Brent crude oil was down 0.6% at $45.17 a barrel.

Gold was down 0.3% at $1,067 an ounce.

The week has seen sharp swings for European bourses. A selloff sparked by mounting geopolitical tensions gave way to gains as investors looked forward to further easing of monetary policy from the European Central Bank at its meeting on Dec. 3.

"People who missed the rally last year [following Mario Draghi's stimulus measures] don't want to miss it now," Mr. Gijsels said. "Despite all the economic worries from China, and geopolitical worries in Europe and elsewhere, I think the central bank is still very much the most important driver of the market. If Draghi wants the market to go up [next week], it will."

Meanwhile, the Federal Reserve's plans for interest rates continue to steer markets. "While the run-up to the Fed's interest rate setting meeting in mid-December could see more volatility in share markets, it's starting to look like investors are becoming less worried about it and that a Fed hike will actually be a vote of confidence in the U.S. economy," Shane Oliver, head of investment strategy at AMP Capital, wrote in a note.

Next week, investors could get more clues into the Fed's plans with the release of the monthly payrolls report and congressional testimony from Chairwoman Janet Yellen.

Write to Riva Gold at riva.gold@wsj.com

 

(END) Dow Jones Newswires

November 27, 2015 04:31 ET (09:31 GMT)

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