HONG KONG (AFP) - Asian markets slumped, following a huge sell-off on Wall Street as disappointing US economic data compounded already deep fears about emerging markets.

Traders were also spooked by a warning from Treasury Secretary Jacob Lew, who said the US borrowing limit would be reached on Friday, renewing fears of a Washington stand-off and possible default.

Tokyo dived 2.62 per cent by the break, Hong Kong sank 2.15 per cent after a four-day holiday weekend, Sydney fell 1.33 per cent and Seoul was 1.41 per cent lower. Shanghai and Taipei were closed for the Chinese New Year holiday.

US stocks took a hammering on Monday after the Institute for Supply Management said its purchasing managers index (PMI) of manufacturing activity fell to 51.3 last month from 56.5 in December. A figure above 50 indicates growth and anything below points to contraction. On Wall Street, the Dow closed down 2.08 per cent, the S&P 500 fell 2.28 per cent and the Nasdaq 2.61 per cent.

The results - following worse-than-expected jobs data last month - raised concerns the United States economy may not be as strong as initially thought, a worry for investors less than a week after the Federal Reserve said it would reduce its stimulus, citing signs of a strong recovery.

They also come as emerging markets are rattled by fears of capital flight caused by the Fed tapering, as well as signs of weakness in China, a key driver of global growth.

China at the weekend released official figures showing its PMI fell to 50.5 last month from 51 in December, and HSBC last week said its PMI for the country came in at a six-month low of 49.5.