Singapore Stocks-Down at midday on euro zone deadlock

* Index down 1 percent at 0500 GMT

* Cyclical counters fall on worsening economic outlook

* Tourism seen resilient - UOB Kay Hian

By Eveline Danubrata

SINGAPORE, Nov 25 (Reuters) - Singapore shares fell on Friday to their lowest level in nearly seven weeks, with hopes of a year-end rally fizzling out due to a deadlock among euro zone policymakers and a grimmer economic picture in Asia.

At 0500 GMT or midway through the trading session, the Straits Times Index (STI) was down 1 percent, or 26.08 points, at 2,651.07. Some 436.1 million shares worth S$415.8 million were traded, compared with 548.1 million shares worth S$466.1 million around the same time on Thursday.

The fall in share prices affected most Asian bourses, with Hong Kong down about 1.25 percent around the same time.

Wall Street was closed on Thursday for the Thanksgiving holiday.

"It seems that the European situation is not going to play itself out anytime soon, so sentiment is likely to remain poor until the year-end," said Jason Hughes, head of premium client management at IG Markets Singapore.

"The PMI (purchasing managers' index) data earlier this week from China also brought back the question of hard or soft landing," he added.

France and Germany agreed on Thursday to stop bickering openly about whether the European Central Bank should do more to rescue the euro zone from a deepening sovereign debt crisis, but this failed to allay investor fears.

Fuelling worries of a global recession, a preliminary PMI survey showed China's factory sector shrank the most in 32 months in November on signs of domestic economic weakness, reviving concerns that the world's second-largest economy may be slipping towards a hard landing.

Cyclical Singapore stocks, or counters that are heavily exposed to the global economy, were largely hit on Friday. Commodities firms Noble Group and Olam International fell 2.3 percent and 2.6 percent, respectively.

At 0500 GMT rig builder Sembcorp Marine retreated 1.9 percent. The stock of Singapore-listed Yangzijiang Shipbuilding gave up 5.5 percent as traders have been concerned about overcapacity in the sector.

UOB Kay Hian said in a report that going forward, externally driven sectors such as manufacturing and wholesale trade will be affected by deleveraging and fiscal tightening in advanced economies. Financial services will also be hit.

But tourism may show resilience on the back of rising visitor arrivals, UOB Kay Hian said. (Reporting by Eveline Danubrata)