There were sharp falls on most western markets yesterday as concerns remain over the Chinese economy – where manufacturing output has fallen to its lowest levels in three years - and the possibility of an interest rate hike in the US in the coming months. 

The main market indices fell by about 3% on Wall Street while the FT100 index in London, which was closed for a bank holiday on Monday, also closed 3% lower at just over the 6,000 mark. It’s now 15% lower than its April high.

The Canadian economy meanwhile has tipped into technical recession after two successive quarters of lower growth.

Australia's GDP growth has slowed, the economy only grew by 0.2% during the second quarter of this year - this was half the rate that analysts had expected.

Meanwhile, amidst all the concern, the US Investment Bank Morgan Stanley has begun to talk up the markets in earnest:  It says that all five of its market-timing signals are now flashing that the current market slide has hit the bottom.

According to the bank, this so-called “full-house” buy alert is a rare occurrence and typically signals a 20% uplift in share prices over the following year.

Speaking in Indonesia yesterday, Christine Lagarde, head of the International Monetary Fund, was less optimistic - she sent out a warning to emerging economies to brace themselves for further market turmoil.

“As the Chinese economy is adjusting to a new growth model, growth is slowing—but not sharply, and not unexpectedly. The transition to a more market-based economy and the unwinding of risks built up in recent years is complex and could well be somewhat bumpy," she said.

Mrs Lagarde continued, "The authorities have the policy tools and financial buffers to manage this transition."