The latest bout of market turmoil came from China's official factory gauge, the manufacturing purchasing manager's index, which on Tuesday reported a reading of 49.7 for the month of August, a fall from 50 in July.

What scared the market was that is that any number below 50 indicates a contraction.

That's not the only thing keeping markets on their toes. Here are five reasons why volatility is likely to remain the key word in markets – for now.

China, the great unknown

Sharemarket gyrations, currency devaluations, shrinking manufacturing numbers. All very confusing, and all generating fear about what it all means to China's economy, the world's second biggest, and the countries who rely heavily on China for trade, such as Australia.

"The reflective action is to assume the worst on the back of how they bungled the stock exchange, and of course the economic numbers do indicate softness in the Chinese economy, that is concerning," Prime Value Asset Management co-chief investment officer ST Wong said.

"In itself it is probably not a surprise to see those numbers but the natural reaction is to assume the worst," he said.

What does China's volatility mean to us? Australia's market capitalisation comprises around 20 per cent in resources companies, so Australia's market is exposed to what happens with China's economy – a slowdown in manufacturing and construction leads to lower demand in Australia's key exports, particularly iron ore.

After the Bull, the Bear

The Australian sharemarket is in the third longest bull market in history, Wilson Asset Management's investment analyst Martin Hickson said, so a correction was expected at some point.

"Typically the average bull market lasts 55 months, we're 77 months into the current bull market," Mr Hickson said.

"We are due for a correction which we are now getting...a correction means entering a bear market, or a 20 per cent fall from the peak in April," he said.

That would mean a fall to 4800 on the ASX, and the sharemarket is now around 16 per cent down from its April peak of 5997, so it has another 4 per cent to fall. 

September, meet Federal Reserve

September is the month pundits have long slated as the likely month for the first interest rate rise in the US in almost a decade. But the increasing turmoil is now reducing those odds, Peak Asset Management executive director Niv Dagan said.

"The market is divided, but we feel that the US won't raise interest rates this year," he said.

"US macroeconomic data has been well supported, however [on Tuesday] the manufacturing PMI was lower than expected," Mr Dagan said.

Mr Hickson said the impending rate hike signalled the end of the "era of free money".

"In the last five or six years, we've been through a period where we've had zero interest rates, there has been huge stimulus," Mr Hickson said.

"We're coming into the back end of that which is leading to large distortions in global markets."

Commodity prices and our economy

Countries relying heavily on commodity exports, Australia among them, have been under pressure since China started moving from a manufacturing to services-led economy.

Fears of a recession in Australia are slowly coming to a head as the construction boom on the east coast states struggles to maintain its lift in economy against the unwinding commodities boom.

Another major commodity exporter, Canada, officially fell into recession overnight after recording two successive quarters of contracting GDP growth.

On Wednesday Australia's GDP for the second quarter came in a 0.2 per cent, slower than economists' expected 0.4 per cent, matching the weakest growth in two years.

A spectacular 27 per cent rally in US oil prices following a request by OPEC member Venezuela to address weak oil prices, did little to inspire buying in energy stocks, Beulah Capital chief investment officer Peter Mavromatis said.

"Normally the energy stocks would rally around that... investors are very nervous," he said.

Market feedback loop

Investors have been caught in a negative feedback loop from overseas market falls, and Wall Street's late entry into the party has stirred up equities, currencies and bond markets.

The near-sightedness of investors is overlooking the work companies are doing to future proof themselves, Mr Wong said.

"The volatility comes on the back of a pretty underwhelming reporting season, most results were in line with expectations, but the market is somewhat short-term focused," he said.

"The indiscriminate selling has extended to CSL, Brambles even Amcor, industrial companies which are looking to reinvest some of their earnings into capital expenditure to grow for the longer term, but resulting in softer short-term earnings outlooks."