LONDON: Fresh evidence of China's economic slowdown sent world stock markets tumbling on Monday, with Europe and the United States following Asia sharply lower in a gloomy start to 2016.
Shanghai equities plunged seven percent, leading an Asian meltdown, as more weak factory data fanned fears about the health of the world's second biggest economy.
In Europe, Frankfurt posted the heaviest losses, diving 4.3 percent. Milan slumped 3.2 percent and Paris shed 2.5 percent.
London stocks lost 2.4 percent with China-exposed mining companies falling the heaviest.
Wall Street was also sharply lower in midday trading, with the Dow Jones Industrial Average down over two percent.
"It hasn't been a textbook start for 2016. It's in fact been one of the worst first trading days on record," said market analyst Jasper Lawler at CMC Markets UK.
"Markets have been swept up in a renewed fear that China's economic slowdown is picking up speed after surprisingly weak manufacturing data," he added.
London's top fallers were mining giants Anglo American, which tanked 7.2 percent, and Glencore which dropped 5.8 percent, on demand fears in leading commodity consumer China.
Global markets were also spooked over the flare-up in tensions between Iran and Saudi Arabia, as investors returned to their desks after the Christmas and year-end holidays.
World oil prices edged higher as key crude exporter Saudi Arabia cut diplomatic ties with fellow OPEC member Iran after a row over the Saudi execution of a Shiite cleric.
"On the first trading day of 2016, the markets have got off to a shocking start," added analyst Manoj Ladwa at brokerage TJM Partners.
"The problems in the Middle East have taken a turn for the worse with the Saudi-Iran stand-off. And China has only added to the negative sentiment as their economy shows further signs of slowing," he told AFP.
Authorities in China suspended trading on its stock markets in the early afternoon after shares collapsed.
The drop in the CSI300 index -- which covers the Shanghai and Shenzhen bourses -- for the first time triggered an automatic early closure under a "circuit breaker" mechanism to curb volatility, after an earlier 15-minute trading halt failed to stem the declines.
The sharp losses revived memories of the summer rout that saw Shanghai crash about 40 percent and trillions of dollars wiped off valuations.
Dealers began selling immediately after data from official and private surveys of manufacturing showed activity shrinking in December. The reports are the latest to highlight weakness in the economy, which is expected to have grown in 2015 at its slowest pace in a quarter of a century.
Adding to the selling is the looming expiration of measures brought in to curb last year's share slump.
China on Monday also cut the yuan's value against the greenback, making it weaker than 6.5 for the first time in more than four-and-a-half years, as pressure on the currency mounts from the country's growth slowdown.
"Despite the use of circuit breakers to pause trading amid aggressive falls, the halt failed to stop the downward momentum of Chinese stocks, after manufacturing PMI disappointed," said Rebecca O'Keeffe, head of investment at online broker Interactive Investor.
"The extreme reaction of investors in China ... suggests that the market is highly risk averse and New Year cheer is in short supply."
Markets across Asia were stung by the data, as well as news that Saudi Arabia had severed diplomatic ties with its old foe Iran on Sunday after protesters ransacked its embassy in Tehran following the execution of a Shiite cleric.
Riyadh gave Iranian diplomats two days to leave the kingdom, while the supreme leader in Tehran said Saudi Arabia would face "quick consequences" for the execution.
The developments are the latest to inflame the region and join a list of negative news that hurt world markets over the past year, including China's economic malaise, plunging oil prices and anaemic global growth.
Investors meanwhile fled to safe investments such as the US dollar and yen, sending stocks and emerging-market currencies falling.
"Definitely a risk-off day as China growth worries persist and geopolitical tensions rise. The yen is the primary beneficiary," said RIA Capital Markets macro strategist Nick Stamenkovic.
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