Chinese shares slumped on Friday, weighing on other Asian stock markets, as a fresh regulatory crackdown and falling industrial profits weighed on market sentiment.
European shares were set to follow suit, with financial spreadbetters expecting Britain's FTSE 100 .FTSE to fall 0.3 percent, France's CAC40 .FCHI to open down 0.4 percent, and Germany's DAX .GDAXI to start the day 0.1 percent lower.
U.S. stock futures ESc1 erased gains after earlier rising 0.3 percent to their highest level since Nov. 9 following Thursday's Thanksgiving Day holiday.
Early selling intensified in China's stock markets in the afternoon, with the Shanghai Composite index .SSEC and the CSI300 .CSI300 plunging 4.7 percent as of 0623 GMT, on track for the biggest one-day drop in more than three months, and set for weekly declines of 4.6 percent and 5 percent, respectively.
That contributed to a drop of 0.9 percent in the broadest index of Asia-Pacific shares outside of Japan .MIAPJ0000PUS, bringing losses for the week to 1.1 percent.Japan's Nikkei .N225 reversed earlier gains to close down 0.3 percent, but was on track to end the week flat.
China's securities regulator has urged domestic brokerages to cease financing clients' stocks purchases through swaps and other over-the-counter contracts, two sources with direct knowledge told Reuters, its latest move to reduce leveraged financing risk in its stock markets after a summer plunge.
The Chinese yuan also came under pressure, weakening to its lowest level in almost three months as investors braced for a decision on Monday by the International Monetary Fund on whether to include the currency in its reserve basket.
Some market watchers fears Beijing's commitment to market reforms and liberalisation may cool if the yuan is added to the reserve basket.
Spot yuan CNY=CFXS opened at 6.3928 per dollar and was changing hands at 6.3942, 46 pips weaker than the previous close and about 0.04 percent away from People's Bank of China's midpoint rate of 6.3915.
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