LONDON, Aug 21 (Reuters) - European shares fell sharply on Friday, tracking a drop in Asian equity markets and U.S. stock futures after a survey showed Chinese factories contracted at their fastest pace since the global financial crisis in 2009.
The pan-European FTSEurofirst 300 was down 1.6 percent at 1,453.62 by 0703 GMT, hitting its lowest level since January and set for its biggest weekly fall of the year.
The Caixin/Markit manufacturing index showed activity in China's factory sector shrank at its fastest pace in almost 6-1/2 years in August as domestic and export demand dwindled. Coming on the heels of weaker-than-expected data in July, it stoked fears of a slowdown in the world's second-biggest economy.
U.S. stock futures fell to a 6 month low after the survey, while Japan's Nikkei stock index fell 3 percent.
The FTSEurofirst 300 is down 8.5 percent since China devalued its currency last week.
"Global markets are in panic mode as the full scale of China's slowdown becomes clearer," Angus Nicholson, market analyst at IG, said in a note.
"The word on everyone's lips is deflation - poison for equity markets. The phenomenal six-year bull market may finally meet its match in China-induced global deflation." (Reporting by Alistair Smout)