European shares extended a sell-off on Wednesday from the previous session as concerns over China’s currency devaluation weighed on global stock markets and hit European exporters.

The pan-European FTSEurofirst 300 index fell 1.2 per cent, while the euro zone’s blue-chip Euro STOXX 50 index declined by 1.5 per cent. The FTSEurofirst had already fallen by 1.7 per cent in the previous session.

China’s yuan hit a four-year low on Wednesday, falling for a second day after authorities devalued it in a move that sparked fears of a global currency war and accusations that Beijing was giving an unfair advantage to its struggling exporters.

The slump in the yuan has impacted German carmakers and European luxury goods stocks, since China is one of their top export markets. It has also weighed on energy and mining shares as China is a top global consumer of commodities. The STOXX Europe 600 autos sector fell 2.4 per cent while the index housing the region's top luxury goods makers also slid 2.5 per cent lower.

Consumer goods group Unilever also declined by 3.2 per cent after being downgraded by Goldman Sachs.

Reuters