Global shares retreated to one-month lows on Wednesday after US manufacturing activity tumbled to more than a decade-low, sparking worries that the fallout from the US-China trade war is starting to spread to the US economy.
A slowdown in US economic growth would remove one of the few remaining bright spots in the global economy and come just as Europe is seen as close to falling into recession.
MSCI's gauge of stocks across the globe .MIWD00000PUS, covering 49 markets, stood near its lowest level since early September after shedding 0.83% in the previous session.
In Asia, MSCI's ex-Japan Asia-Pacific shares index .MIAPJ0000PUS dropped 0.32%, with Australian shares falling more than 1%. Japan's Nikkei .N225 slid 0.50%.
Adding to tensions in Asia, North Korea carried out at least one more projectile launch on Wednesday, a day after it announced it will hold working-level talks with the United States at the weekend.
On Wall Street, the S&P 500 .SPX lost 1.23% to hit four-week lows.
Selling was triggered after the Institute for Supply Management's (ISM) index of factory activity, one of the most closely-watched data on US manufacturing, dropped 1.3 points to 47.8, the lowest level since June 2009.
A reading below 50 indicates contraction in the manufacturing sector. Markets had been expecting the index to rise back above 50.
The data came after euro zone manufacturing data showed the sharpest contraction in almost seven years.
"In terms of the outlook on the manufacturing, US-China trade talks planned next week is everything. If that goes well, we could well see a V-shaped recovery in the ISM data in coming months," Hirokazu Kabeya, chief global strategist at Daiwa Securities.
"That means we can't just bet on a further decline in the US economy now. On the whole I don't think we need to change our view that the US economy remains relatively solid," he added.
The poor data lifted the Fed funds rate futures price sharply, with the November contract FFX9 now pricing in about an 80% chance the U.S. Federal Reserve will cut interest rates this month, compared to just over 50% before the data.
The US 10-year Treasuries yield fell to 1.637 percent US10YT=RR, reversing earlier gains sparked by a jump in Japanese government bond yields and hitting the lowest level since early September.
Gold rose back to $1,479.80 per ounce XAU= from a two-month low of $1,459.50 hit on Tuesday on the back of a robust US dollar.
In the currency market, the U.S. dollar slipped from Tuesday's two-year high against a basket of currencies as the ISM survey has shaken the notion that the US economy will withstand the escalating trade war.
The yen rose to 107.75 yen per dollar JPY=, from Tuesday's low of 108.47.
The euro stood at $1.0932 EUR=, having bounced off a near 2 1/2-year low of $1.0879 hit in European trade.
The Australian dollar fetched $0.6705 AUD=D4, having hit a 10 1/2-year low of $0.6672 the previous day after the Reserve Bank of Australia cut interest rates and expressed concern about job growth.
The weak US data pushed oil prices to near one-month lows, although reports of a third-quarter decline in output from the world's largest oil producers kept oil from falling further.
US crude stocks fell last week, data from industry group the American Petroleum Institute showed on Tuesday, helping to lift oil prices in Asia.
Brent crude LCOc1 futures rose 0.63% to $59.26 a barrel, after hitting a four-week low of $58.41 on Tuesday, while US West Texas Intermediate (WTI) crude CLc1 gained 0.78% to $54.04 per barrel after hitting one-month low of $53.05.