Wall Street shares closed sharply down after the suspension of trading on Chinese markets for the second time this week spread alarm among investors, BBC reported.

After Asian and then European stock markets fell, Wall Street's Dow Jones and S&P 500 indexes shed 2.3%. Earlier, circuit-breakers triggered a suspension in Chinese trading 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 is lifted from today. 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.

Why is this happening now?

China's central bank began to devalue the yuan last year. Also, 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.

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.

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%.

Photo: www.nbcnews.com