Global stock markets have plunged amid fears that the US Federal Reserve has left it too late to begin cutting interest rates and risks damaging the world’s largest economy.

Shares tumbled in Asia, with Japan’s Nikkei 225 index closed down 5.8pc for its worst day in four years, after weaker than expected US factory data showed output dropped to an eight-month low in July amid a slump in new orders.

Federal Reserve chairman Jerome Powell indicated on Wednesday that a first interest rate cut could come in September as policymakers held interest rates at 23-year highs of 5.25pc to 5.5pc.

However, markets in Hong Kong, South Korea, China and Australia all dropped sharply as traders priced in that the Fed will be forced to cut interest rates at all three of its remaining meetings this year.

The sell-off was exacerbated by a Big Tech sell-off on Wall Street as results from Apple, Intel and Amazon failed to impress.

Kiyoshi Ishigane, chief fund manager at Mitsubishi UFJ Asset Management, said: “I didn’t expect stocks to fall this much.

“This is probably because there are concerns that the US economy will collapse in a big way, which is the most unpleasant pattern for Japanese stocks.”

José Torres, a senior economist at Interactive Brokers, said: “The short-lived satisfaction of Fed chief Powell communicating decent odds of a September rate cut has turned sour as investors are now panicking that the central bank isn’t trimming soon enough.”

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