European shares fell sharply after trading overnight in China was halted for the second time this week as prices plunged again amid continued investor panic.
The FTSE 100 slipped by more than 100 points, or over 2%, to 5,900, nearing levels previously seen in December. Marks & Spencer was the only riser as it announced that chief executive Marc Bolland was to leave following latest dismal figures from its clothing division.
UK shares have had a miserable start to 2016 this week, driven by fears over China - the world's second biggest economy. The slide continues a plunge in blue-chip stock values over recent months.
Global share falls have been compounded by the slide in the price of oil, with Brent crude collapsing to fresh lows close to $32 a barrel - the lowest level since April 2004.
The FTSE 100's current weak performance is a far cry from last April when London's leading share index reached record highs above 7,100. It comes as Chancellor George Osborne warns of a "dangerous cocktail" of threats to the UK economy, at a speech in Cardiff.
Chinese markets have lurched up and down as regulators gradually withdraw measures that were imposed after the main stock index plummeted in June.
The latest plunge came after China accelerated the depreciation of its currency, the yuan.
A similar stock market drop on Monday caused a sell-off on markets around the world.
Trading was suspended on Thursday after a market index, the CSI 300, dropped 7% half an hour after markets opened, triggering a "circuit breaker" that came into effect on 1 January.
Analysts have warned Chinese markets are likely to be highly volatile in the near future as they seek a stable level following last year's turmoil.
For the "circuit breaker" - a 15-minute pause in trading - to be activated the CSI 300 must fall 5% within 30 minutes.
However, Thursday's decline was so fast that before that could take effect, the index hit the 7% limit that ended trading for the day.
Meanwhile, the benchmark Shanghai Composite Index fell 7.3% to 3,115.89, while the Shenzhen Composite Index for China's smaller second exchange slumped 8.3% to 1,955.88.
The yuan's depreciation should help China's manufacturers because it makes their goods cheaper for foreign buyers. But it hurts foreign producers trying to sell to the Chinese market because it makes their goods dearer - unless they cut profit margins.
Investors fear that the scale of the yuan's depreciation could mean that the slowdown in China's economic growth is even worse than previously thought.
UK-listed mining stocks such as Anglo American and Glencore were badly hit by the latest developments as China is the leading consumer of global metals. Companies that export to China, such as fashion brand Burberry and car maker BMW, also fell.
The FTSE 100 Index is not a barometer of the health of the UK economy as many of its constituent companies derive most of their business overseas. But its movements will affect British investors and funds held by UK employers' pension schemes.
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