(MENAFN- AFP) Global stock markets plunged further on Tuesday as more gloomy evidence emerged of China's economic slowdown, leading to heavy sell-offs from Hong Kong to New York.
Downbeat data showed factory activity in China hit a three-year low, fuelling concern over the health of the world's number two economy.
Tokyo stocks tumbled almost four percent as China woes spread, with Europe's main markets following in its wake losing around three percent in mid-afternoon deals.
China's statistics bureau said its Purchasing Managers' Index of manufacturing activity came in at 49.7 last month, its lowest since August 2012. A reading below the 50-point mark indicates contraction.
The data sent Wall Street to a sharply lower open with the Dow Jones Industrial Average down 1.67 percent fifteen minutes into trade, the S&P losing 1.55 percent and the tech-rich Nasdaq giving up 1.28 percent.
Christine Lagarde, head of the International Monetary Fund, also added to the gloom Tuesday when she warned that global growth this year would be "likely weaker" than previously anticipated, less than two months after the IMF cut its global forecast for 2015 to 3.3 percent.
- Starting September in red -
"Equity markets (are) starting the new month in the red after yet more disappointing China manufacturing data increases concerns about (the) slowing of the world's number two economy," said analyst Mike van Dulken at Accendo Markets.
Frankfurt, London and Paris were also pulled downward by declining domestic manufacturing figures.
"Another set of disappointing Chinese manufacturing data has prompted (losses) for UK and European stocks on Tuesday with a slowdown in Europe's own manufacturing sector exacerbating the declines," added CMC Markets analyst Jasper Lawler.
Global equities -- hammered last week on worries that the flagging Chinese economy would spark a new global recession -- also fell on Monday over the uncertain outlook for US interest rates before a closely watched jobs report due on Friday.
A US Federal Reserve rate hike could further jolt global confidence, which has already been buffeted by China's slowdown.
"Investors are concerned about the strength of the global economy, which is why you're seeing a sell-off in various stock markets," said strategist Ayako Sera at Sumitomo Mitsui Trust Bank Ltd. in Tokyo.
The Shanghai stock market ended down 1.23 percent on Tuesday, having tumbled by more than four percent at one point.
Tokyo slumped 3.84 percent, with a stronger yen hitting exporters, while Sydney fell 2.12 percent and Hong Kong finished 2.24 percent lower.
"The manufacturing index still shows that the economy is in the process of seeking a bottom," said Wu Kan, a Shanghai-based fund manager at JK Life Insurance.
"The market is unlikely to pick up any time soon."
- Shift to safety -
China's stock markets have slumped 40 percent since hitting a June 12 peak, with investors concerned about high valuations and the underlying strength of the economy.
The seeming inability of Communist Party leaders to stem the crisis -- five interest rate cuts since November have not staunched the sell-off -- has raised wider fears about their ability to effectively manage China's transition from a low- to middle-income economy.
In the latest bid to avert further losses, Beijing urged listed companies to merge and restructure.
Authorities will strongly encourage tie-ups to help push reform of state companies and inject vitality into the economy, a joint statement released by four government agencies said late Monday.
Volatility in China and other emerging markets has pushed up the price of investments considered safe, including the yen and bullion.
On Tuesday the dollar fell to 120 yen from 121.24 yen in New York trade late on Monday.
The European single currency advanced to $1.1252, up from $1.1213.
Oil prices meanwhile fell after recording gains of more than 25 percent over the previous three sessions.
The commodity had surged Monday after the US Department of Energy said domestic output in June was much lower than first stated, while monthly estimates for January-May were revised lower.
Also, a statement from OPEC -- to the effect that the continuing downward pressure on prices "remains a cause for concern" -- fanned hopes that the oil cartel could cut output levels.
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