The outlook for the global economy became bleaker yesterday as signs of a deeper manufacturing downturn in China emerged, coupled with slow growth in Europe and the US. Japanese shares led declines in the region as the double whammy of a firmer yen and downbeat manufacturing data hit investors’ risk appetite.

Last week, the global market volatility of the past month figured high on a list of reasons the Federal Reserve did not raise USA interest rates as many expected for the first time in nearly a decade. South Korea’s Kospi added 0.9 percent to 1,982.06 and Australia’s S&P/ASX 200 rose 0.7 percent to 5,103.60.

VW chief executive Martin Winterkorn stepped down on Wednesday, taking responsibility for one of the biggest scandals ever in the German auto sector. Elsewhere in Europe, Milan’s main shares index slid 2.91 percent, Madrid lost 2.73 percent and Athens dropped 2.06 percent. Malaysia’s consumer price index rose an annual 3.1 percent in August after climbing 3.3 percent in the previous month, official figures showed.

Australian shares hit a two-year low amid a broad-based selloff as disappointing manufacturing data out of China, the country’s top trading partner, exacerbated global growth worries. The broader All Ordinaries index advanced 69.8 points or 1.39 percent to close at 5,102.3. The local currency fell against the US dollar. “Falling demand both domestically and overseas is only going to make the task of achieving 7 percent growth that much harder”, said Craig Erlam, senior market analyst at Oanda in London.

Elsewhere, the benchmark indexes in Indonesia, Malaysia, Singapore and Taiwan were down between 0.9 percent and 2.3 percent. Medium-dated yields held above four-week lows ahead of a $35 billion sale of new five-year Treasuries at 1 p.m. (1700 GMT), part of this week’s $90 billion in fixed-rate debt supply.

VW Shares have lost 34 percent since its admission of cheating on USA air-pollution tests. Departing Chair Jenny Hutson denied her resignation is due to any fall out with management or the board. However Atlanta Fed President said a rate hike later this year was still possible, Fed Chair Janet Yellen speaks on Thursday. The spread between the 10-year bond and the 2-year bond has narrowed to 146 basis points from 176 basis points in early July, indicating markets were expecting sub-par economic growth.

At the same time, French investment bank Societe Generale downgraded the European automobile sector from “overweight” to “neutral” amid the emissions scandal, sending the STOXX 600 autos sector down 1 percent.

However, Johnson Matthey continues to feel the pain from the Volkswagen scandal, as a large proportion of the company’s revenues are made up from emission control technologies.

In Greece, newly re-elected Prime Minister Alexis Tsipras appointed two bailout negotiators to head his economic team on Tuesday, Reuters reported, in a move to assure lenders that the new government will not backtrack on its cash-for-reform deal.