* Stocks set for biggest drop in two weeks
* Oil slump continues
* U.S. dollar edges up (Updates with open of U.S. markets, changes byline, dateline; previous LONDON)
NEW YORK, Nov 9 (Reuters) - Global stocks were on pace for their biggest drop in two weeks while oil prices weakened again on Friday and soft Chinese data hit demand for risky assets.
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.
"Everybody is starting to look at oil with a nervous eye, its probably too early to make any claims about oil falling because of demand versus supply but when you fall from $75 to $60 it all of a sudden makes people interested in what is going on in oil," said Michael Antonelli, managing director, institutional sales trading at Robert W. Baird in Milwaukee.
Adding to pressure was data from China, which showed 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.
"China always is lurking in the background, they have been on the struggle bus all year and they are still on the struggle bus," said Antonelli.
The Dow Jones Industrial Average fell 189.2 points, or 0.72 percent, to 26,002.02, the S&P 500 lost 24.53 points, or 0.87 percent, to 2,782.3 and the Nasdaq Composite dropped 114.76 points, or 1.52 percent, to 7,416.13.
World 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 towards monetary policy.
European shares were also hit by the prospect of Fed's interest rate rises in the face of a global economy that has shown signs of slowing, apart from the United States.
The pan-European STOXX 600 index lost 0.42 percent and MSCI's gauge of stocks across the globe shed 1.05 percent.
The dollar, which had weakened sharply after mid-term elections, was on track to rise for its second straight day and was poised for a fourth straight week of gains.
Further dollar gains can pose headwinds for global 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 0.13 percent, with the euro down 0.2 percent to $1.1339.
The equity weakness pushed bond yields lower. Benchmark 10-year notes last rose 11/32 in price to yield 3.1911 percent, from 3.232 percent late on Thursday.
Oil prices fell to multi-month lows as global supply increased and investors worried about the impact on fuel demand of lower economic growth and trade disputes.
U.S. West Texas Intermediate crude fell 0.77 percent to $60.20 per barrel and Brent was last at $70.07, down 0.82 percent on the day.
(Reporting by Chuck Mikolajczak Editing by Susan Thomas)