Most Asian markets closed flat on 2 September after staging late rallies to recover early losses.

The Shanghai Composite index closed down 0.2% at 3,160.17 points after falling nearly 4% earlier in the session, as data released on 1 September suggested Chinese manufacturing activity was at its lowest level in over six years in August.

The bleak assessment sent US stocks spiralling down overnight on Wall Street, while investor sentiment was also hit by a gauge of US factory activity falling to a two-year low.

The Institute for Supply Management's factory activity index fell to 51.1 in August from 52.7 in the preceding month, the lowest score since May 2013. A reading above 50 indicates expansion.

Analysts said the slowdown in the manufacturing sector could persuade the Federal Reserve against raising interest rates in September.

"It suggests that the recent eruption in uncertainty toward Chinese and global growth is beginning to affect US business decisions," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.

"We look for the Fed to take a pass on raising rates this month as they continue to assess the incoming economic data for any evidence of fallout."

Rest of Asia

Shares in Hong Kong followed the mainland lower, with the Hang Seng benchmark sliding 1.2% to 20,934.94.

Australia's S&P/ASX 200 index closed up 0.1% at 5,101.46 despite data showing the country's gross domestic product grew a less-than-expected 0.2% in the second quarter compared to the previous three months.

On 1 September, the Reserve Bank of Australia opted to maintain its key lending rate unchanged at a record low of 2%, citing China's weakening economy and the fall in global commodity prices.

Elsewhere, Japan's Nikkei benchmark index erased earlier gains to close down 0.4% at 18,095.40 points.

In South Korea, the Kospi was up by 0.05% at 1,915.22.