LONDON (The Deal) -- Markets tumbled in Europe and Asia in a morning of drama, as China closed its exchanges early for the second time this week when they hit the circuit breaker of 7% after just 14 minutes of trading, and the central bank slashed the reference exchange rate of the Chinese currency with its biggest one-day cut since August last year.

The surprise devaluation of the renminbi by 0.5% to RMB6.5646 per dollar sparked fears of an Asian currency war, although the People's Bank of China was only following market pressure in setting the fix. New rules in place since last August are designed to ensure the bank follows the market lead rather than arbitrarily push the currency in the direction desired by the government.

While the Japanese yen, sometimes seen as a haven, rose, weighing heavily on Tokyo's export-oriented Nikkei 225 index, the currencies of commodities exporters such as Canada and Australia moved in the opposite direction. Australia, in particular, relies on Chinese demand to keep prices high, although South Africa's gold miners got a rare boost as the yellow metal also strengthened due to its role as a haven. 

Randgold Resources  (RGORF) was the biggest riser on London's FTSE 100, rising 1.96% at 4,413, as the price of gold lifted. But general miners Anglo American (AAUKY) and BHP Billiton (BHP) dropped 8.8% to 246.60 pence and 5.535 to 670 pence, respectively. Meanwhile falling oil prices -- dragged down by increased production even as Middle East tensions remain high -- are being taken as a sign of global economic weakness rather than as a chance to grow consumer demand. 

European markets stayed in their slump even after the publication of eurozone unemployment figures showing the jobless rate across the region had fallen to 10.5% in November -- the lowest level since October 2011. In the European Union as a whole, including non-eurozone countries such as the U.K and most of the Nordic and Eastern European nations, the unemployment was down to 9.1%, the lowest level since July 2009. 

In London, retailer Marks & Spencer Group  (MAKSF)  bucked the trend, at one point gaining as much as 1.7% to over 446 pence. The stock rose after M&S announced the earlier than expected retirement of CEO Marc Bolland, who has been under pressure to improve performance. The company announced worse-than-expected general merchandise sales in the third quarter despite better margins following Bolland's decision to hold back from heavy discounting. But it also said it had its best Christmas season ever in food. 

But a different measure of the health of the retail sector might be the 11% share price drop at single-price discounter Poundland which despite selling everything at prices of £1 or 99 pence, depending on which of its two brands you shop in, said it suffered from a decline in footfall, as shoppers increasingly stay at home. Nevertheless, the FTSE 250 retailer managed a respectable 29.4% growth in total revenues to £424.9 million ($619 million), including sales at the 99p Store chain, which Poundland acquired in 2015. Poundland said it expected the acquisition to generate incremental Ebitda of at least £25 million.

In London, the FTSE 100 was down 2.83% at 5,901.35, while in Germany the DAX was off 3.28% at 9,878.73 and the CAC 40 was down 2.79% at 4,355.4.

In Asia, Tokyo's Nikkei 225 closed down 2.33% at 17,767.34, while the TOPIX finished the day off 2.03% at 1,457.94. Hong Kong's Hang Seng index was off 3.09% at 20,333.34. In China, the source of the day's woes, the CSI300 combined Shenzhen and Shanghai Index, which is the benchmark by which the market closure is decided, finished down 6.93% at 3,294.38.