London, UK (BBN)-Stock markets in London, Paris and Frankfurt have fallen sharply as fears of a Chinese economic slowdown continue to haunt investors.
London’s FTSE 100 index was down by 2.6 per cent in morning trade, while major markets in France and Germany lost nearly 3 per cent.
Shares in Asia were hit overnight, with the Shanghai Composite in China closing down 8.5 per cent, its worst close since 2007.
The Chinese authorities tried in vain to reassure investors.
In addition, oil prices have plunged to six-year lows, as traders worry about slowing growth in the world’s second-largest economy.
“It does appear that we’re moving very quickly to the downside,” said David Madden, market analyst at IG.
Widespread investor fears about the sharp drops in Asia were exacerbated by thin trading volumes in Europe, with many investors away on holiday.
“I think more uncertainty lies ahead,” Madden said.
Investors might have to wait for several weeks for bargain hunters to come into the market to lift stocks.
Beijing’s latest intervention, to allow its main state pension fund to invest in the stock market, failed to calm traders’ fears, both in China and abroad.
Over the past week, the Shanghai index fell 12 per cent, adding up to a 30 per cent drop since the middle of June.
The sharp fall sparked a global sell-off, with the Dow Jones in the US losing 6 per cent, while the FTSE 100 posted its biggest weekly loss this year, of 5 per cent.
Earlier this month, the Chinese central bank devalued the yuan in an attempt to boost exports.
European investors worry that a cheaper Chinese currency will make European exports less competitive.