European stock markets extended their losing streak yesterday, with benchmark indexes in Frankfurt and London hitting seven-month lows as fears of a global economic slowdown took hold.

The Athens stock market also fell 3.5 per cent as the country looked set for new elections on September 20.

Greek Prime Minister Alexis Tsipras had been expected to seek early elections to quell a rebellion in his leftist Syriza Party and seal support for a painful bailout programme.

The pan-European FTSEurofirst 300 equity index closed down 1.9 per cent at 1,477.35 points.

Its losses for August have already matched those for June, which was its weakest month in two years, as worries over lagging inflation and slowing growth in China weigh on global financial markets.

China is having the biggest impact on the markets. I’d look to sell any rallies at the moment

There were some decent European corporate figures out, with shares of Dutch retailer Ahold rising 2.1 per cent after a solid rise in profits.

However, Deutsche Bank managing director Nick Lawson wrote to clients that earnings expectations for Europe were ‘probably too high’, while others pointed to negative pressure from worries over China.

US bank Citigroup cut its global economic growth forecasts for 2016 to 3.1 per cent, from 3.3 per cent, citing significant downgrades for the euro area and China among others.

“China is having the biggest impact on the markets. I’d look to sell any rallies at the moment,” said Berkeley Futures associate director Richard Griffiths.

Germany’s DAX index, which contains major carmakers that export to China, weakened by 2.3 percent, while the euro zone’s blue-chip Euro STOXX 50 fell 2.2 per cent. The DAX is some 16 percent below a record high of 12,390.75 set in April and at its lowest level since January.

Mark Evans, fund manager at Taube Hodson Stonex Partners, said a domestic recovery within Europe – helped by economic stimulus measures from the European Central Bank (ECB) – could offset problems caused by the slowdown in China.

Nevertheless, concerns over China – which is a leading global consumer of commodities –pushed the shares of major oil companies down yesterday, with the STOXX Europe 600 Oil & Gas Index dropping 1.3 per cent.