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Global shares have fallen sharply after trading was suspended on Chinese markets for the second time this week.
Wall Street followed the downward trend, with indexes sliding more than 1%, while European shares were down about 2% in late afternoon trading.
Circuit-breakers triggered the Chinese share suspension following a 7% fall in the country's main index.
Later on Thursday, the Chinese authorities said they were suspending the circuit-breaker system.
The mechanism was brought in late last year to reduce volatility on China's markets and had not been triggered until this week. It will be lifted from Friday.
The slump on Chinese markets prompted renewed panic on global markets. Share dealing was halted in the first 30 minutes, making it China's shortest trading day on record.
By 15:00 GMT the FTSE 100 share index in London had recovered slightly and was 1.96% lower at 5,954.15.
Germany's Dax was worst affected, down 2.54% at 9,954.57, while France's Cac-40 was down 1.8% at 4,399.63.
Nerves
Amid the uncertainty, the euro gained nearly a cent against the dollar, rising to $1.0868.
The pound fell against the euro by 0.92% to €1.3445.
Investors are nervous after the Chinese central bank moved to weaken the the country's currency, the yuan, for the eighth day running, sparking fears of a currency war.
This move is designed to boost exports by making Chinese goods cheaper outside the country, analysts have speculated.
It is also being interpreted as an indication that consumer demand in China may be slowing more sharply than feared.
Official economic growth in China is still running at just below 7%.
But moves to devalue the yuan suggest attempts to shift the economy from an export-led one to a consumer and services-led one are running into problems.
Soros warning
Legendary US billionaire investor George Soros has warned that 2016 could see a global financial crisis on as big a scale as that seen just eight years ago.
Giving a speech to an economic forum in Sri Lanka, Mr Soros said China faced a " major adjustment problem."
He added: "I would say it amounts to a crisis. When I look at the financial markets there is a serious challenge which reminds me of the crisis we had in 2008,according to Bloomberg.
It is not the first time the billionaire hedge fund manager has warned of impending doom on the financial markets. In 2011 he warned the Greek debt crisis that consumed Europe was more serious than the 2008 financial crisis.
Analysis: Karishma Vaswani, Asia business correspondent
This time the culprit is very much the Chinese currency, the yuan.
The People's Bank of China again surprised markets by settling the official midpoint rate on the yuan at 6.5646 against the US dollar - that's the lowest rate since March 2011.
Why are they doing this? Well there are a few theories, but no real answers.
That's because the Chinese, as one analyst put it to me, are infamous for being pretty much the only government in power to stay silent during a crisis.
You would have had to be hiding under a massive rock not to realise the Chinese economy is in trouble - all the indicators have been pointing to that for the last few years.
After the trading halt, the China Securities Regulatory Commission announced that major shareholders could not sell more than 1% of a company's shares within three months as of 9 January.
It comes as a previous six-month ban of stock sales by major shareholders is set to expire on Friday.
Why is this happening now?
China's central bank devalued the yuan last Thursday, then announced the biggest month-on-month drop in its foreign exchange reserves. A World Bank report has highlighted weaknesses in China's economy. Buffeted by events in China, world stock markets are also being hit by oil prices falling to a 14-year-low.
Should we be worried?
China is responsible for 17% of all the world's economic activity, so any downturn in spending there affects the rest of the world.
Exporters to China could be hit hard as China is a key buyer of industrial commodities such as oil, copper and iron ore.
What happens next?
There is now a lot more pressure on other Asian countries to depreciate their currencies in response to China's move.
China's attempts to impose circuit breakers with a 7% threshold appear to have only added to the panic. On Wall Street, circuit breakers kick in at 20%.
Amy Zhuang, a China analyst with Nordea Bank, told the BBC she expected "a rush selling" as soon as Chinese markets opened on Friday.
Bernard Aw, market strategist at trading firm IG, said the negative sentiment was because of the perception that China may further weaken the yuan, igniting concerns over what that might mean for other economies.
AFP
A weakening of the currency is often seen by investors as an indication that that the economy is doing worse and needs to be propped up by boosting exports.
A lower yuan makes the cost of exporting goods for Chinese companies cheaper, giving the slowing factory sector a boost.
What are China's 'circuit-breakers'?
- The measures were announced in December after a summer of dramatic market losses - used for the first time time on Monday and again on Thursday
- They automatically stop trading in stock markets that drop or appreciate too sharply - a 15-minute break if the CSI 300 Index moves 5% from the market's previous close, or a whole-day halt if it moves 7% or more.
- Supposedly introduced to limit panic buying and selling - which is more likely in small investor-dominated markets like China's - but critics say they only add to selling pressure the next day.
After disappointing manufacturing data on Monday, the mainland benchmark index plunged 7%, triggering a global equities sell-off.
The negative sentiment spilled over the border to Hong Kong, where the Hang Seng index also lost 3%, closing at 20,333.34 points.
Japan's Nikkei 225 index finished down 2.3% to 17,767.34, while Australia's S&P/ASX 200 index lost 2.2% to 5,010.30 as energy shares dragged down the market.
Meanwhile, Brent crude prices hit new 11-year lows on oversupply concerns, also weighed on investors' confidence.
