Investing.com - Shares in Shanghai dropped sharply as a key gauge of manufacturing sentiment in China fell to a 78-month low, adding to already negative sentiment.
The Shanghai Composite fell 2.16%, while the S&P/ASX 200 eased 2.11%. Australia's fortunes are closely-linked to China as top export destination for commodities.
On Wednesday, the Caixin Manufacturing index for September fell to 47, from the August level of 47.3, putting it at a 78-month low. On Tuesday, the Asian Development Bank lowered its 2015 economic growth projections for China from 7.2% and 6.8%.
Overnight, U.S. stocks fell broadly on Tuesday erasing gains from one session earlier, amid continuing fears of the spillover effects from a potential recession in China, the world's second's largest economy.
The widespread Chinese concerns festered, as China president Xi Jinping arrived in Seattle to meet with Bill Gates and take part in a U.S.-China technology summit over the next two days. Xi will then head to Washington for his first state visit at the White House, where he is expected to discuss a wide array of topics with U.S. president Barack Obama, including the state of the global economy. On Tuesday, the Asian Development Bank lowered its 2015 economic growth projections for China from 7.2% and 6.8%. It came ahead of the release of key Chinese manufacturing data on Wednesday, after the Caixin Manufacturing PMI index slumped to six-and-a-half year lows last month.
Although the Dow Jones Industrial Average pared some losses late in the session, it still closed down by 179.72 or 1.09% at 16,330.47, posting its third losing session in the last four trading days. The NASDAQ Composite index and the S&P 500 Composite index also fell considerably on a bearish day for the major indices. During Tuesday's session, the NASDAQ lost 72.24 or 1.50% to 4,756.72, remaining far below the symbolic 5,000 level.
The S&P 500, meanwhile, dipped 24.23 or 1.23% to 1,942.74, as all 10 sectors closed in the red. Stocks in the Basic Materials, Industrials and Technology industries lagged, each falling by more than 1.4% on the day.