Global Markets Sustained Heavy Losses in August.......

Wall Street traded sharply lower, with the Dow Jones down more than 300 points, or 1.9%, at 16,215.

European markets also fell, with the UK's FTSE 100 closing down 3% and France's Cac 40 and Germany's Dax about 2.4% lower.

 

Earlier, figures for August showed factory activity in China contracting at its fastest pace in three years.

The official manufacturing purchasing managers' index (PMI) dropped to 49.7 from 50 in July. A figure below 50 indicates contraction.

It follows recent turmoil in the markets sparked by concerns over a slowdown in the world's second-largest economy.

"The importance of today's announcement is that the slowdown is hitting the larger state-backed firms who typically take longer to feel the pain," said Josh Mahony from online trading firm IG Index.

"There are precious few signs that China is beginning to recover, and while [the People's Bank of China's] action can provide a temporary reprieve, we are yet to see any evidence that it is doing any good to the economy," he added.

August losses

Energy companies led the way down on the Dow, with Chevron and Exxon Mobil down about 3%. This followed a fall in the oil price, which was down more than 4% at $51.89.

Before Tuesday's fall, the price of oil had risen by about 25% in the past three trading sessions.

The S&P 500 was also down about 2% at 1,934.18, while the tech-heavy Nasdaq was 1.6% lower at 4,699.21.

Global markets sustained heavy losses in August - for both the UK's FTSE 100 and the US's S&P 500, it was the worst month since May 2012. A slight rebound at the end of last week sparked hope that the start of the new month could herald a period of calm on international markets.

China's factory figures appear to have dashed those hopes.

"While a measure of calm has returned to these markets recently and they have seen relief rallies, many of the underlying negative fundamentals are still in place," said Nariman Behravesh, chief economist for IHS.

"As a result, the downside risks for most commodity prices, exchange rates and stock markets are likely to persist for some time, while growth in many parts of the world, especially in emerging markets, is likely to deteriorate further."