"Volatility is the enemy of investor appetite," a head of index trading at a US fund told Reuters. "Any sign of government support to prop up the market will be used by investors to exit the market completely rather than add fresh positions."
Chinese markets have been hit by the release on Monday of official data showing the country's industrial profits declined 0.3 per cent year-on-year in June, compared with a 0.6 per cent rise in May and 2.6 per cent gain in April.
This data comes after the preliminary China Caixin purchasing managers index (PMI), a manufacturing index based on a survey of factory purchasing managers, surprised markets by dropping to a 15-month low in July.
China stocks saw their sharpest daily percentage decline since 2007 on Monday, with the Shanghai Composite Index ending 8.5 per cent lower. The market suffered three weeks of continued losses that wiped out £1.5 trillion after peaking in June.
Investors were also concerned by the likelihood of an imminent interest rate hike by the US Federal Reserve, ahead of a policy meeting starting later today.
The Shanghai Composite Index tumbled 1.7 per cent to 3662.82, Hong Kong's Hang Seng was up 0.6 per cent to 24503.94. Tokyo's Nikkei 225 edged down 0.1 per cent to 20328.89 while Seoul's Kospi remained flat at 2039.10. Australia's S&P/ASX 200 was down 0.1 per cent at 5,584.69.
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