* Stocks set for biggest drop in two weeks
* Oil slump continues
* U.S. dollar edges up (Updates with close of European markets)
By Chuck Mikolajczak
NEW YORK, Nov 9 (Reuters) - Stocks around the globe were closing in on their biggest drop in two weeks as soft Chinese data hit demand for risky assets while oil prices weakened again on Friday.
U.S. stocks were broadly lower, with energy shares falling more than 1 percent as benchmark Brent crude touched a six-month low and U.S. crude fell below $60 for the first time since March after entering a bear market on Thursday.
Data from China added to the downward pressure, showing factory-gate inflation slowed for the fourth month in October on cooling domestic demand and manufacturing activity.
On the U.S. side, producer prices rose more than expected in October and at their fastest pace in six years. But measures of underlying price pressure cooled, bolstering the view that the U.S. central bank is not facing a resurgence in inflation.
European shares dipped as mining and oil stocks sold off, but they managed to end the week with a small gain.
"You have all this data coming in and you have a lot of cross currents. We are in the midst of that peaking process for growth in the United States and we don’t know where things settle out with regards to the euro zone," said Thomas Martin, senior portfolio manager at Globalt Investments in Atlanta, Georgia.
The Dow Jones Industrial Average fell 239.43 points, or 0.91 percent, to 25,951.79, the S&P 500 lost 36.54 points, or 1.30 percent, to 2,770.29 and the Nasdaq Composite dropped 162.14 points, or 2.15 percent, to 7,368.75.
Equities snapped a streak of seven straight days of gains on Thursday after the U.S. Federal Reserve held interest rates steady but appeared to remain on track to raise its key interest rate next month.
Some investors had hoped that the sharp share price falls during what has been called "Red October" might have encouraged the U.S. central bank to take a more dovish approach toward monetary policy.
The pan-European STOXX 600 index lost 0.37 percent and MSCI's gauge of stocks across the globe shed 0.13 percent.
The dollar, which had weakened sharply after Tuesday's U.S. mid-term elections, was up for a second straight day and on track for a fourth straight week of gains.
Further dollar gains can pose headwinds for risky assets as that translates into tightening financial conditions as most emerging market economies borrow in dollars. A strong dollar could also hurt earnings of multinational U.S. corporations.
The dollar index rose 0.19 percent, with the euro down 0.26 percent to $1.1332.
The equity weakness pushed bond yields lower. Benchmark 10-year notes last rose 12/32 in price to yield 3.1893 percent, from 3.232 percent late on Thursday.
Oil prices fell to multi-month lows as global supply increased and investors worried about the possibility of slowing fuel demand, putting U.S. crude on track for the longest stretch of daily declines since 1984.
U.S. West Texas Intermediate crude fell 0.73 percent to $60.23 per barrel and Brent was last at $70.21, down 0.62 percent on the day.
Reporting by Chuck Mikolajczak; Editing by Susan Thomas and Dan Grebler