China's manufacturing sector suffered its quickest deterioration in over six years, leading to a three-year market low and other sectors of the Chinese economy also slowed down significantly.

In response, all three major U.S. stock indices, the Dow Jones, the S&P 500 and NASDAQ, were down two percent in early trading.

"While a measure of calm has returned to these markets recently and they have seen relief rallies, many of the underlying negative fundamentals are still in place," said Nariman Behravesh, chief economist for IHS. "As a result, the downside risks for most commodity prices, exchange rates, and stock markets are likely to persist for some time, while growth in many parts of the world, especially in emerging markets, is likely to deteriorate further."

Investors panicked once China's official manufacturing Purchasing Managers' Index (PMI) dropped to 49.7.