Europe close: Stoxx 600 follows Chinese stocks into bear territory

European stocks fell sharply lower, apparently on reports of financial tensions in China and after another leg down in oil futures.

Reports that the People's Bank of China had injected $15bn into the country's financial system to sustain liquidity raised new concerns about financial strains in the largest economy in that hemisphere.

So did a report that some lenders in China had stopped taking stock in smaller listed companies as collateral for loans. Selling in the US ahead of the long holiday weekend and the expiration of options may also have played a hand.

As of the close, the benchmark Stoxx Europe 600 index had surrendered 2.82%, France’s CAC 40 another 2.38% and Germany’s Dax 2.54%.

Overnight, the Shanghai Composite index fell 3.5%, closing in bear market territory, while Hong Kong’s Hang Seng slid 1.5%. A bear market is when the price of an asset drops 20% from its peak. The Stoxx 600 also finished in bear market territory.

On a more positive note, data released early on Friday morning showed China's so-called total social financing - the broadest measure of credit growth in the country - grew at its fastest pace in 12 months, once certain distortions were stripped out, according to Capital Economics.

Even so, "last night’s Chinese selloff has once again seen the Asian powerhouse move back into bear market territory for the second time in just over six months. This overnight performance has been enough to trigger a selloff in across the board in Europe," said Alastair McCaig, market analyst at IG.

Oil prices were also under pressure, falling below the $30 level again to fresh 12-year low. West Texas Intermediate slumped 5.91% to $29.46 a barrel on the ICE as of 17:17GMT, while Brent crude dropped 4.86% to $29.45.

The Stoxx 600 oil and gas index fell 3.98%. Basic resources took the biggest beating, however, with the sub index for that sector down a whopping 6.45%.

BHP Billiton paced the decline, with the stock down 6.4% after the miner said it expects to book a $7.2bn (£5m) impairment charge on the value of its onshore US assets in its half-year results due to the steep drop in oil prices.

Elsewhere, French supermarket operator Carrefour slipped 1.38% after its fourth quarter revenue met analysts’ expectations.

Shares in beleaguered German car maker Volkswagen also skidded lower, erasing 5.6% from the company's value after data from the European Automobile Manufacturers’ Association revealed that its market share in Europe fell last year for the first time since 2007.

On the upside, Swedish clothing retailer Hennes & Mauritz was in the black after posting a 10% rise in December sales.

London-listed BT Group rose after the Competition and Markets Authority approved its plans to acquire EE.

Shares in French supermarket group Casino gained after the company said it will sell its majority stake in Thai hypermarket operator Big C Supercenter.

On the macroeconomic front, figures released by Eurostat showed the Eurozone's trade surplus came in at a nine-month high in November.

The trade surplus rose to €22.7bn in November compared with a revised €19.8bn the previous month, above consensus estimates for €21bn.

Seasonally-adjusted exports were up 1.6% while imports nudged down 0.1%.