US President Donald Trump has used his favourite social media platform Twitter to take another swipe at the Federal Reserve and its chairman Jerome Powell.

"As I predicted, Jay Powell and the Federal Reserve have allowed the [US] Dollar to get so strong, especially relative to ALL other currencies, that our manufacturers are being negatively affected," Mr Trump tweeted on Tuesday (local time).

"Fed Rate too high. They are their own worst enemies, they don't have a clue. Pathetic!"

Mr Trump has made several online posts in the past few months insulting the independent Fed and its chief, who he personally appointed.

The President even impugned Mr Powell's loyalty for not cutting US interest rates aggressively enough, questioning who the "greater enemy" was — the Fed chairman or Chinese President Xi Jinping.

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What sparked Mr Trump's latest outburst was new data revealing US manufacturing activity had contracted sharply, recording its worst result in more than 10 years.

This also stoked investors' fears of a worsening global economic slowdown, exacerbated by Mr Trump's ongoing trade war with China, triggering a Wall Street sell-off overnight.

The Institute for Supply Management's latest figures showed US factory activity fell to 47.8 in September, its weakest result since June 2009.

A reading below 50 indicates contraction in the manufacturing sector and is not a good sign for the economy.

September's reading marked the second-straight month that the index fell below the 50 threshold. The index has now declined for six consecutive months.

Market snapshot at 7:45am (AEST): ASX SPI futures -1.1pc at 6,653, ASX 200 (Tuesday's close) +0.8pc at 6,743

ASX SPI futures -1.1pc at 6,653, ASX 200 (Tuesday's close) +0.8pc at 6,743 AUD: 67 US cents, 54.5 British pence, 61.3 euro cents, 72.2 Japanese yen, $NZ1.07

AUD: 67 US cents, 54.5 British pence, 61.3 euro cents, 72.2 Japanese yen, $NZ1.07 US: Dow Jones -1.3pc at 26,573, S&P 500 -1.2pc at 2,940, Nasdaq -1.1pc at 7,909

US: Dow Jones -1.3pc at 26,573, S&P 500 -1.2pc at 2,940, Nasdaq -1.1pc at 7,909 Europe: FTSE 100 -0.7pc at 7,360, DAX -1.3pc at 12,264, CAC -1.4pc at 5,598, Euro Stoxx 50 -1.4pc at 3,518

Europe: FTSE 100 -0.7pc at 7,360, DAX -1.3pc at 12,264, CAC -1.4pc at 5,598, Euro Stoxx 50 -1.4pc at 3,518 Commodities: Brent crude -0.6pc at $US59.25/barrel, spot gold +0.6pc at $US1,479.80/ounce, iron ore flat at $US93.38/tonne

With lingering trade tensions weighing on exports, the US data mirrored similar patterns in the eurozone, Japan, the United Kingdom and China.

"This is serious," Torsten Slok, chief economist at Deutsche Bank Securities in New York, said.

"There is no end in sight to this slowdown, the recession risk is real."

Wall Street's main indices — the Dow Jones, S&P 500 and Nasdaq — dropped by around 1.2 per cent each.

The industrial-skewed Dow index lost 344 points to close at 26,573.

'It's all due to the trade war'

European markets dropped overnight, with Germany's DAX shedding 1.3 per cent and London's FTSE down 0.7 per cent.

It was also the result of weak manufacturing data weighing on investor sentiment.

The final reading of Purchasing Managers Index (PMI) manufacturing data for the eurozone in September came in at 45.7, also in contraction territory.

This was also the weakest result in seven years (since October 2012).

"The PMIs across the globe have continued to deteriorate and obviously we are in line with that deterioration — it's all due to the trade war," Peter Cardillo, chief market economist at Spartan Capital Securities, said.

A slowdown in US economic growth at a time when Europe is seen as close to falling into a recession would remove one of the few bright spots among global markets.

In addition, the World Trade Organisation (WTO) on Tuesday cut its forecast for growth in global trade this year by more than half.

The WTO said further rounds of tariffs and retaliation, a slowing economy and a disorderly Brexit could squeeze it even more.

It now expects global merchandise trade to increase by 1.2 per cent this year, compared with its much rosier April estimate of 2.6 per cent.

For 2020, the WTO is predicting growth of 2.7 per cent, down from its previous estimate of 3 per cent.

"The darkening outlook for trade is discouraging, but not unexpected," WTO director-general Roberto Azevedo said in a statement, urging WTO members to resolve trade disagreements and cooperate to reform the Geneva-based body.

Aussie dollar sinks

Australian shares are set to fall sharply in the wake of the disappointing US and European factory data and global market sell-off.

By 7:10am (AEST), ASX futures were down 77 points or 1.1 per cent.

The Australian dollar, meanwhile, sank as low as 66.72 US cents, its lowest value since March 2009.

But the local currency has since lifted back to 67 US cents, also around a decade low.

It comes after the Reserve Bank on Tuesday slashed the nation's official cash rate to a fresh record low to stimulate the flagging domestic economy.

Furthermore, RBA governor Philip Lowe has conceded that further rate cuts are inevitable.

Oil prices slipped after the weak US and eurozone factory data was released, with Brent crude losing 0.6 per cent to $US59.23 per barrel.

However, investors piled into safe haven assets and drove up the price of spot gold to $US1,478.58 an ounce.

Demand for safe havens also boosted the Japanese currency sharply (+1pc), with the Australian dollar falling to 72.2 yen.

ABC/Reuters