SHANGHAI (AFP, BLOOMBERG) - Asian stocks witnessed a fresh round of volatility on Wednesday (Sept 2), as further evidence of slowing growth in China's economy brought a new bout of uncertainty to global markets.

Most bourses in the region reversed hefty morning losses to sit in positive territory in the afternoon, in the latest day of roller-coaster trading.

Shanghai's stocks plunged 4.39 per cent at the opening before ending the morning 0.31 per cent higher, with analysts saying the government likely provided support ahead of a two-day World War II remembrance holiday.

The Straits Times Index was trading up 0.43 per cent at 2,895.03 as of 2:02 pm. Japan's Nikkei was down 0.5 per cent. But U.S. S&P e-mini equity futures were up 0.9 per cent, which put a floor under sentiment. Australia's S&P/ASX 200 Index pared its drop to 0.2 per cent

The MSCI Asia Pacific Index dropped 0.6 per cent by 2:44 pm in Tokyo, swinging from a loss of 1.1 per cent to a gain of 0.4 per cent before sliding again. A measure of 30-day historic volatility climbed to the highest since mid-2013.

Clouds are gathering over the worldwide economy, amid mounting signs of stumbling growth. On Tuesday, official data showed Chinese factory activity contracted in August, the latest sign that growth in China - which accounts for more than 13 per cent of global GDP - is slowing.

Other reports out Tuesday pointed to weaker growth in Europe, while US data showed the slowest factory expansion in two years.

The Australian dollar - which is heavily linked to demand for the country's abundant natural resources - plumbed six-year lows with figures out of Canberra showing the economy logged a slower-than-expected 0.2 per cent quarterly expansion.

That came after Canada officially entered recession, hit hard by stubbornly-low oil prices.

Both countries' economies are dependent on the exports of commodities - such as iron ore - that have powered Chinese growth over the last decade.

Adding to tensions are uncertainties about the US Federal Reserve's plans for interest rates ahead of a policy meeting this month, with fears a tightening of monetary policy in the world's number one economy will further dampen the worldwide economy.

"You have worries about the global growth outlook led by Chinese concerns at a time when the Fed is thinking about raising interest rates and that's leaving investors very twitchy," Shane Oliver, a global strategist at AMP Capital Investors Ltd. in Sydney, told Bloomberg News.

"I think we've seen the worst but it's an environment where volatility is likely to continue."

While the Shanghai stock market is somewhat decoupled from the real economy - many analysts and players acknowledge it is akin to gambling - wild ructions there are seen as worrying indications of Beijing's ability to manage structural changes.

Commentators say China's high government-spending model of the last three decades is unsustainable, and needs to transition into consumer spending.

They point to the country's huge population as a vast, under-tapped source of demand that could offer opportunities for growth; but fears abound that Communist Party managers are struggling to shepherd the changes.

Washington, whose own recovery from the global financial crisis is still far-from entrenched, will this week urge China to better communicate its policies, when representatives from the elite Group of 20 meet in Turkey on Friday.

Treasury Secretary Jacob Lew "will emphasise that, fundamentally, the world needs more demand", said a US official, who spoke on condition of anonymity.

Wu Kan, a Shanghai-based fund manager at JK Life Insurance Co. said Beijing appeared to have been buying blue-chip stocks over recent days in an effort to support the market.

"But investors have lost confidence amid the ongoing deleveraging and the overnight global rout," he said. "The correction isn't over yet."

The Chinese losses were reflected across most of the region, with the recovery seen in other markets.

Hong Kong was marginally higher by the break and Seoul was up 0.19 per cent after starting in the red.

However, Sydney, where several companies with close business ties to China are listed, was still lower, dropping 0.37 per cent.

Tokyo, which dived almost four per cent Tuesday, was up 1.06 per cent in the afternoon, with exporters helped by a weaker yen.

On Wall Street on Tuesday the Dow was down 2.84 per cent, the broader S&P 500 lost 2.96 per cent and the Nasdaq gave up 2.94 per cent.

And in Europe there were losses of 3.03 per cent in London, 2.38 per cent in Frankfurt and 2.40 per cent in Paris.

Despite the ructions caused by the China crisis International Monetary Fund chief Christine Lagarde on Wednesday said Asian economies were doing "pretty well".

Speaking in Jakarta for a two-day visit, she said the recent turmoil highlighted the "extraordinary gains" made by Asian economies but warned further volatility was on the horizon.

"Now the situation is changing yet again, and we are all feeling the impact of China's rebalancing and moving to a revised business model," she told a conference.

The Australian dollar, which was hovering around 70 US cents Wednesday afternoon, briefly slipped to 69.95 US cents, its lowest in six years. The Reserve Bank of Australia on Tuesday kept interest rates at a record-low 2.0 per cent to support growth.

Oil extended its sell-off to a second day. US benchmark West Texas Intermediate for October delivery fell 94 cents, or 2.1 per cent, to US$44.47 while Brent slipped 88 cents, or 1.8 per cent, to US$48.68.

On Tuesday WTI sank 7.7 per cent and Brent lost 8.5 per cent. Until then the contracts had enjoyed a three-day rally, adding more than 25 per cent, on hopes for an easing of a worldwide supply glut.