More than $2.3tn was wiped off global stocks this week as China’s slowing economy and currency depreciations spooked investors around the world, leading to the worst start to a year for markets in at least two decades.

A robust US jobs report, which added a stronger-than-expected 292,000 extra jobs in December, allayed some concerns over US economic growth on Friday but failed to rescue the grim week for financial markets.

The catalyst for this week’s market turmoil has been China’s plunging stock market and weakening currency. Beijing’s powerful influence over financial markets this week underlines for investors how the country’s policy decisions reverberate across the global stage.

“This heightened sensitivity of risk assets to Chinese policy is a relatively new phenomenon,” said Mark Haefele, global chief investment officer at UBS Wealth Management. “We can see how even relatively small falls in the Chinese [renminbi] … are having a major impact on global markets.”

After initially climbing on the jobs report, the S&P 500 sagged to take its loss for the week to about 6 per cent — its worst start to a year on record — as it briefly suffered a technical correction, according to S&P Dow Jones Indices. The index has lost more than $1tn so far this year.

Every major European stock market also fell again on Friday.

Chinese stocks managed to stabilise at the end of a turbulent week after authorities scrapped a controversial circuit-breaker and lifted the daily currency fix for the first time in nine days.

The FTSE All-World index has lost a total of 6.1 per cent this week, making it the worst five-day start to a new year since at least 1994, when the index was established, and the worst week overall since 2011. More than $2.3tn was lopped off the index.

“China is playing a bigger and bigger role in global markets,” said Win Thin, a strategist at Brown Brothers Harriman. “This is the new reality and markets have to accept that.”

Chinese volatility has complicated the outlook for money managers already dealing with tensions between Iran and Saudi Arabia and the start of a US interest rate tightening cycle by the Federal Reserve.

“Investors are fearful of many factors as the negative narrative gains traction generating a sense of malaise,” said Tobias Levkovich, an equity strategist with Citi. “There is some fairly impressive good news but it seems to be overshadowed by headline risks including recent geopolitical ones.”

Interest rate futures indicate that investors are still discounting the chances of the Federal Reserve lifting interest rates another four times this year as planned, despite the unexpectedly strong unemployment data released on Friday.

Some fund managers and analysts argue that the developing world — and China in particular — could be the final stage of a three-part rolling global crisis that began in the US in 2007 and then moved to the eurozone in 2010. Emerging market exchange rates took another dive after the strong US jobless report lifted the dollar, sending the JPMorgan Emerging Market Currency index to a new all-time low.

Natural resource prices have also fallen into an even deeper funk due to concerns over slowing Chinese demand, with the Bloomberg Commodity index tumbling to a fresh 17-year low. The WTI and Brent crude oil prices have both fallen to about $33 a barrel this week, the lowest since 2004.

Mr Thin said Chinese policymakers had “mishandled” its currency management, and pointed out that “in the absence of communication, markets assume the worst”. But he argued that investors were overreacting to the moves and cautioned against extrapolating too much from a handful of trading days.

“Markets are panicking and lurching from one concern to the next, but we cannot judge the year as a whole by the first week,” he said. “We shouldn’t throw in the towel quite yet.”