London's key FTSE 100 index plunged on Thursday, losing 2.7 per cent by late morning, following the second intervention this week to suspend trading on China's stock markets.

The FTSE fell 162.4 points to 5,911, while Germany's DAX lost 3.2 per cent, as European and Asian markets were again hit by China's woes.

Thursday's drop in Chinese share prices triggered an automatic halt in trading for the second time this week, as the authorities introduced new measures to restrict share sales.

Prices on the CSI 300 Index plummeted more than 7 per cent in the first 30 minutes of trading following a further devaluation of the Chinese currency, the yuan, which hit its weakest level in nearly five years, official data showed. 

The CSI 300 comprises the 300 largest firms listed on the mainland.

The new "circuit breaker" mechanism stops trading for 15 minutes if prices on the index fall more then 5 per cent, and stops trading for the day if prices fall more than 7 per cent.

The mechanism also stopped trading for the day on Monday, the first trading day of the year.

China Thursday issued new rules to restrict share sales. Major shareholders must not sell more than 1 per cent of a listed company's share capital every three months, according to a notice on the website of the China Securities Regulatory Commission. 

The negative sentiment on the Chinese mainland spread to other major Asian markets.

Japanese shares were dragged down by a stronger yen and the heavy losses in China.

The benchmark Nikkei 225 Stock Average lost 423.98 points, or 2.33 per cent, to end at 17,767.34, hitting the lowest in three months. The broader Topix index was down 30.9 points, or 2.08 per cent, at 1,457.94.

The main indexes of the Hong Kong stock exchange were down over 2.5 per cent.

The routs this week followed disappointing results released from China's manufacturing sector, and come amid doubts about the overall strength of the Chinese economy.

Analysts say China may not meet its growth target for 2015 of about 7 per cent.

The circuit breaker mechanism was introduced this year after volatility on the Shanghai stock exchange sent jitters through global markets in the second half of 2015, and led to a host of official measures to shore up prices.

The circuit breaker was designed "to comfort panic in the market," according to Shanghai-based independent analyst Ye Tan. 

"It will be somewhat effective at this very bad moment of panic and low market liquidity, but it won't work for long. What will happen in three months? If trading is suspended for many days of the year, the market will collapse," Ye said.  

Related stories

Latest news

Syrian opposition rules out future role for President al-Assad

The Syrian opposition said Friday it would not accept any role for President Bashar al-Assad in the future of the war-torn country, reacting to a recent US shift saying that removing al-Assad is no longer a priority for Washington.

Russian Army integrates breakaway forces of Georgian province

Parts of the small fighting forces of the Georgian breakaway province of South Ossetia have been placed under Russian military control, Russian Defence Minister Sergei Shoigu said on Friday.

Czech Republic's Pilsner Urquell beer is now Japanese

Japanese brewing company Asahi completed its takeover of the Czech brewery Pilsner Urquell on Friday, Asahi said in a statement.

Judge approves 25-million-dollar settlement of Trump University case

A US district judge on Friday approved a 25-million-dollar settlement of lawsuits and state fraud allegations against Trump University, the US president's now-defunct business venture.

Former Thai premier Thaksin to junta on reconciliation: 'Cut me out'

Former Thai prime minister Thaksin Shinawatra on Friday announced that he is not interested in the junta-led reconciliation process, three days after the junta handed him a half-a-billion-dollar tax bill for his past business deal.

Dalic: We welcome possible deal between Agrokor and banks

The government welcomes the possibility of an agreement being concluded between the Agrokor food company and creditor banks, and the bill on vitally important companies is not a fallback plan but the result of the government's care for the overall economic and financial stability of Croatia, Deputy Prime Minister and Minister of Economy Martina Dalic told a press conference in Zagreb on Friday.

Croatia, China sign action plan for cooperation in agriculture

The Croatian and Chinese ministries of agriculture on Friday signed an action plan for cooperation in the field of agriculture for the period 2017-2018, the Croatian ministry said in a statement.

ZSE indices up, Agrokor shares in focus of investor interest

The Zagreb Stock Exchange (ZSE) indices on Friday rose by more than 1.8%, with stocks of the Agrokor food and retail concern being in the focus of investor interest again.

Berlin police defend handling of Berlin market attacker

Berlin police defended themselves on Friday against accusations that they stopped surveillance on Berlin Christmas market attacker despite knowing in June 2016 he was dangerous.

Croatia, creditors tailor emergency measures to save tottering giant

Croatia's tottering retail and food giant Agrokor reached an agreement with its creditors, putting its debts standby and allowing it to continue working during emergency restructuring, the Croatian branch of Austria's Erste Bank said Friday.

Agrokor's creditors say standstill agreement to go into force today

A standstill agreement regarding the Agrokor concern's existing financial obligations to banks will take effect on Friday, additional capital will be injected into the concern in the coming days and the concern will be actively restructured, which includes a change of its management, it was said on Friday after a meeting between Agrokor's suppliers and creditor banks.

Palestinians, UN slam Israel's new settlement plan

Palestinians, Israeli activists and the UN lambasted the government of Israeli Prime Minister Benjamin Netanyahu on Friday, a day after it gave the go-ahead for the first new West Bank settlement in a quarter of a century.

South Sudan rebels release three abducted foreign oil workers

South Sudanese rebels have released three foreign engineers they abducted in early March in the oil-rich Upper Nile region, Foreign Affairs Ministry official Mawein Makol Arik said on Friday.

Turkish opposition: Imprisoned party chief has gone on hunger strike

The head of Turkey's pro-Kurdish opposition party has launched a hunger strike from prison.

European leagues threaten Champions League schedule clashes

The European Professional Football Leagues (EPFL) on Friday threatened schedule clashes on Champions League matchdays in an ongoing dispute with the governing body UEFA.

Danish court revokes citizenship of IS volunteer

A Danish appellate court on Friday stripped a man of his Danish citizenship for volunteering to fight for the extremist Islamic State in Syria.

Banks and Agrokor agree on key elements of standstill agreement

Member banks of the coordinating committee of financial creditors and representatives of the Agrokor food company have in principle agreed on key elements of a standstill agreement, which is expected to be signed later today, announcing changes in the company's management team, Erste Bank said in a statement on Friday afternoon.

Syrian man on trial in Sweden; mosque attack labelled terrorism

A Syrian man went on trial Friday in the southern Swedish city of Malmo, charged with terrorism and arson after an attack last year on a building used as an assembly hall by Shiite Muslims.