European stock markets plummet after China’s ‘Black Monday’

European stock markets have fallen sharply after Chinese shares witnessed their worst day since 2007, as global investors continue to fear an economic slowdown in the world’s second-largest economy.

As the Shanghai Composite Index- China’s benchmark stock index- closed down 8.5%, the Xinhua news agency admitted that China was facing a “Black Monday”.

Over €400 billion had been wiped off the value of Europe’s largest 300 companies by 2pm, according to Reuters data, and the FTSeurofirst300 is on track for its biggest one-day decline since March 2009.

The Stoxx 600 index, which includes smaller European companies, has suffered even heavier selling and is down by around 5%.

The United Kingdom’s FTSE 100 had slumped to below 6,000 points at lunchtime, around 4.5% lower than Friday’s close. It was the first time that the British index slipped below the 6,000 mark since early 2013.

Germany’s DAX 30 index also slipped by around 3%, dipping into bear market territory after losing 20% of its value since April. France’s CAC index was down 3.5%.

Asian shares were the worst hit, with Hong Kong’s Hang Seng Index plummeting by almost 5% by lunchtime, and the Shenzhen Composite Index down by over 7.5%.

“The private money is all trying to get out of the market and what is holding up the market is only the government intervention,” said Rajiv Biswas, the chief Asia economist for IHS Global Insight. “We’ve seen a lot of volatility in the Shanghai market with big swings. But clearly this kind of fall is substantial. It is a big event when a market falls by that amount in one day.”

China’s central bank devalued the country’s currency, the yuan, two weeks ago, in an attempt to boost exports. European investors worry that a cheaper Chinese currency will make European exports less competitive.

Over the past week, the Shanghai index fell 12%, adding to a 30% drop since the middle of June. The Dow Jones subsequently dropped by 6% and the FTSE 100 by 5%- its biggest weekly loss this year.

Today’s rout indicates that Beijing’s recent intervention to allow its main state pension fund to invest in the stock market has failed to calm traders’ fears.