* Brent falls below $118 after China flash HSBC PMI * Sentiment supported by euro zone, U.S. debt talk hopes By Seng Li Peng SINGAPORE, July 21 (Reuters) - Brent crude reversed early gains on Thursday to drop below $118 after news that China's factory sector contracted at its fastest pace in 28 months, but hopes of solutions to sovereign debt woes on either side of the Atlantic could keep a floor under prices. Brent LCOc1 fell 41 cents to $117.74 a barrel by 0341 GMT after reaching an intraday high of $118.46 a barrel. U.S. crude CLc1 for September, which became the front-month contract on Thursday, fell 23 cents to $98.17 a barrel. The HSBC flash PMI, the earliest available indicator of industrial activity in China, the world's No 2 oil consumer, fell to 48.9 in July, its lowest since March 2009, as monetary policy tightening and slack global demand weighed on the economy. The index was last below 50 in July 2010. The 50-point level in the PMI demarcates expansion from contraction, with a reading above 50 indicating growth. "The knee-jerk reaction is to sell off assets like oil. Something is always going to take a bit of a hit, or a blow somewhere, and it looks like it is going to start in the manufacturing sector," said Ben Le Brun of CMC Markets in reference to the fall in PMI. "This is not official data. It's from HSBC although the official rating will show contractions when released," he said.

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