Fears that China’s efforts to stabilise its financial markets may backfire, along with worries that the country’s move to devalue the renminbi could ignite a currency war, sent traders dashing away from risky assets.

The S&P 500 dropped 2.4 per cent, the Dow Jones Industrial Average shed almost 400 points and the Nasdaq Composite tumbled 3 per cent. The Nasdaq ended the day in correction territory, a 10 per cent dip from a recent high, according to preliminary calculations.

It’s been a painful start to 2015 for US markets. Just four sessions in, the S&P 500 is off nearly 5 per cent for the year. The CBOE’s VIX, which tracks expected volatility on the broad-market index over the next 30 days, has launched higher by more than 35 per cent.

In a sign of the strength of Thursday’s sell-off, about 87 per cent of volume in the New York Stock Exchange was in declining shares. Every major S&P 500 sector was in the red, led by cyclical stocks like technology and materials.

Traders took shelter in defensives stocks, such as utilities that are favoured for their consistent dividend yields. Gold, seen as another safe haven, jumped 1.4 per cent, extending its 2016 rally to 4.5 per cent.

On the other side of the spectrum, US crude oil prices skidded 2.1 per cent amid global economic fears. Copper, a key industrial metal, shed nearly 3 per cent.

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