Luxury goods firms and vehicle makers, which are highly sensitive to Chinese demand, came under the most intense pressure.

Carmaker BMW fell 2.7 percent while luxury goods group Swatch and LVMH both weakened by more than 3 percent.

Futures for the Euro STOXX 50, Germany’s DAX, France’s CAC and Britain’s FTSE 100 all fell by 0.4-0.5 percent.

The PBOC said in a statement that it would aim to keep the exchange rate at 6.2298 yuan per US dollar, down from 6.1162, and would try to allow the currency to depreciate by 2%. Changes in futures aren’t necessarily reflected in market moves after the opening bell.

European mining stocks jumped on more weak economic data from China, which boosted hopes of further stimulus measures in the world’s second-biggest economy. The Shanghai Composite Index was flat.

The PBOC devaluation of the yuan “represents a long overdue, albeit partial, fightback in the global currency wars that have sapped China’s competitiveness”, said Richard Iley, an economist at BNP Paribas SA.

Indexes in Europe had started the week in downbeat fashion as some disappointing trade and factory-price data from China over the weekend hurt shares in commodity-linked companies. Greek stocks saw some of the largest gains in Europe, with National Bank of Greece SANBG 10.39 % up 7.9% and Hellenic Telecommunications Organization SAHLTOY -2.30 % up 3.1%.

However, the Athens stock market – which has consistently underperformed this year due to concerns over Greece’s debt problems – rose after Greece and its global lenders reached a new bailout deal.

In London, engineering group Meggitt was on the front foot after saying it has agreed to acquire the advanced composites business of Cobham for $200m in cash finance from existing resources, in a deal that is expected to be immediately earnings-enhancing.

In currency markets, the euro fell 0.3% against the U.S. dollar to $1.0983.