A savage sell-off in global markets overnight has set up a second day of losses on the ASX as renewed concerns on China's economy added to the fear selling that left sharemarkets in tatters in August.
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On Wednesday morning Sydney futures traders pointed to the market opening 1.2 per cent lower. It comes a day after a broad-based sell off led the benchmark S&P/ASX 200 to close down 2.1 per cent, shaving $32 billion off the market's value.
Those losses could extend further after a night of heavy selling across US and European exchanges.
On Wall Street, the Dow Jones Industrial Average fell 2.8 per cent, while the S&P 500 lost 3 per cent and the Nasdaq Composite shed 2.9 per cent.
In Europe, London's FTSE 100 exchange fell 3 per cent, while the Stoxx 50 lost 2.5 per cent, France's CAC 40 lost 2.4 per cent and Germany's DAX shed 2.4 per cent.
At the top of the list of concerns for investors was the state of China's economy. The official factory gauge of the world's second largest economy, the Purchasing Manager's Index, fell from 50 in July to 49.7 in August. Any number below 50 signals a contraction.
China's PMI was not the only data raising eyebrows. The JP Morgan Global Manufacturing PMI gauge shrank from 51 in July to 50.7 in August, reaching a two year low, indicating a slowdown was not limited to China.
"The August PMI surveys suggest that conditions in the global manufacturing sector remain relatively lacklustre, with growth staying stubbornly below its long-run trend and jobs growth slowing to near-stagnation," David Hensley, director of global economic coordination at JP Morgan said.
Australia's GDP figures will be closely watched today, after Canada, another major commodity exporter, fell into recession after two quarters of negative growth.
Some economists have tipped Australia may also be heading towards a recession, predicting Australia's GDP to have shrunk in the June quarter. Consensus estimates from Bloomberg show an expectation of a 0.4 per cent rise in the second quarter, with just 2.2 per cent for the year.
Commodities prices also suffered, with benchmark brent oil down 10.2 per cent on Wednesday morning, falling below US$50 a barrel to a fresh six-year low of US48.64. Iron ore however steadied, with the price for immediate delivery to the Chinese port of Qingdao up slightly to $US56.69 a tonne.
On the London bourse however, Australian miners were savaged overnight, with BHP Billiton down 6.7 per cent and Rio Tinto shedding 4.9 per cent.
"Things aren't really getting better," National Australia Bank senior currency strategist Emma Lawson said.
"The circular theme of markets continues, with equities weakening, weighing on broader risk, weighing on currencies, weighing on equities," she said.
The unwavering, increasing supply of many commodities added to the weakness in equities, she said.
