China stocks pull back from the brink

Countdown to China's market meltdown

China's markets have closed out a rough week on a high note.

The Shanghai Composite closed 2% higher on Friday, while the Shenzhen Composite added 1.1%.

Still, the week saw steep losses. The Shanghai Composite shed 10%, while the Shenzhen Composite plummeted 14.3%.

Markets closed early twice this week after plunging 7%. On Thursday, trading was halted after only half an hour.

In a bid to calm nervous investors, Chinese officials have suspended the halting mechanism, which had been in effect for only four days. Regulators scrapped the so-called "circuit breakers" because many believe they were fueling sharp trading losses -- rather than taming them.

Peter Boockvar, chief market analyst at The Lindsey Group, said removing the circuit breakers could take some short-term pressure off Chinese stocks -- but won't be a cure-all.

"People now don't have that same deadline to sell...but China's stock market is going to go where it's going to go," said Boockvar.

China's disarray has caused chaos in global markets.

Related: What's driving the global market freakout ... in 2 minutes

In the U.S., stocks have had one of their bleakest starts to a year. The wave of selling has knocked the Dow down 911 points, or 5%, so far this year. That's the worst four-day start to a year on record, according to FactSet stats that go back to 1897.

Both the Dow and Nasdaq officially closed on Thursday in a "correction," signaling the first 10% drop from prior highs since last summer.

Related: Dow has worst four-day start to a year on record

European stocks aren't faring any better.

The DAX, Germany's benchmark stock index, is off 7% for the year already and France's CAC 40 is down 5%. On Thursday, German carmakers that rely on exports to China were leading the losses -- Volkswagen (VLKAF) slid 5%, while BMW and Daimler (DDAIF) both lost around 4% each.

It's not helping that crude oil prices continue to tumble. They plummeted to a new 12-year low Thursday.

Related: Oil prices hit a 12-year low

Investors are also alarmed by the steep decline in China's currency. The country's central bank set the yuan's value at the weakest level since March 2011. The currency devaluation may help boost growth, but it can hurt asset values and cause money to exit the country.

To that point, China's central bank said it burned through a record $108 billion in foreign-exchange reserves in December in an effort to slow the sharp devaluation of its currency. It still has $3.3 trillion in cash, but that's the lowest level since late 2012.

Related: Why China is still the biggest threat to U.S. stocks

While investors should focus on China's economy, not its turbulent equity market, the economy isn't looking that great either. New reports released this week reinforce concerns over the pace of growth.

CNNMoney's Fear & Greed Index, which is calculated based on several market indicators, is also flashing "fear." Just a week ago it was in "neutral" territory.

-- Jonathan Stayton and Ivana Kottasova contributed to this report.

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