LONDON Growing expectations that the U.S. Federal Reserve will soon start to reduce its monetary stimulus weighed on markets Friday ahead of the next batch of U.S. economic data.
Chinese shares had a hugely volatile day after a trading frenzy that was blamed on one brokerage's mistaken computerized buying orders.
Despite the uncertainty in Shanghai, the main focus in the markets remains the Fed, and when it will start tapering its stimulus. The latest shift in sentiment came after figures Thursday showed weekly U.S. jobless claims fell to a near six-year of 320,000.
The claims figures reinforced views that the economy is strong enough to withstand less support from the Fed. The central bank is currently buying $85 billion of financial assets each month in an effort to lower interest rates to spur borrowing and economic growth.
"Investors reviewed the good U.S. data yesterday and decided that it presaged Fed tapering in September, so it will be interesting to see if today's numbers, including housing starts, building permits and the Michigan confidence index, are treated in a similar vein," said Chris Beauchamp, market analyst at IG.
Ahead of the next load of U.S. data, stocks were largely drifting.
In Europe, Britain's FTSE 100 fell 0.1 percent to 6,479 while Germany's DAX dropped 0.2 percent to 8,361. The CAC-40 in France was bucking the trend somewhat, rising 0.2 percent to 4,101.
U.S. stocks were poised to make up some of Thursday's losses, with Dow futures and the broader S&P 500 futures up 0.2 percent.
Earlier, most stock markets tracked Thursday's pullback in Europe and the U.S. Japan's Nikkei 225 index fell 0.8 percent to close at 13,650.11 while Hong Kong's Hang Seng shed 0.1 percent to 22,517.81. South Korea's Kospi declined 0.2 percent to 1,920.11.
The main point of interest during the Asian session was Shanghai, where volumes soared to 54 percent above Thursday's level, with 1.5 billion shares changing hands. The main market index jumped 6.5 percent before ending the day down 0.6 percent.
A brokerage, Everbright Securities, said in a statement it suffered an unspecified problem with a computerized trading system. Everbright's computers sent 7 billion "wrong instructions" to purchase shares, according to the state-run China News Service.
Everbright asked to have its trades canceled, CNS said. The exchange, however, said on its website that transactions already closed would be cleared normally.
Elsewhere, trading was fairly muted. In the currency markets, the euro was flat at $1.3345 while the dollar rose 0.4 percent to 97.43 yen.
And the benchmark New York contract for crude oil was 12 cents lower at $107.21 a barrel. Oil traders are focused on developments in Egypt amid fears of a potential supply disruption. Egypt is not a major oil exporter, but traders worry that violence there could spill over to more important oil-exporting countries or disrupt the Suez Canal, a major trade route.