Any thoughts that the market ups and downs of last week were a bit of end-of-summer light-headedness have by now been forgotten. There is a battle on between those who believe the world economy’s growth outlook is now under serious threat, and the opposing camp who feel that things will still work out more or less ok.

And so the mood of the day depends on which argument is supported by the latest pieces of data. Overnight indications from China were negative, with the official purchasing managers’ index (PMI) falling from 50 in July to 49.7 in August. The PMI measures the buying expectations of those running industry and is thus an indicator of future manufacturing growth – any number below 50 suggests a contracting level of activity.

While the main Chinese market in Shanghai pulled back from a loss of almost 6 per cent at one stage to close just over 1 per cent lower, it was all enough to set European markets off again, with big falls recorded in morning trading.

Poor PMI data from some European economies also did not help, though euro zone unemployment data was better. Even in high-growth Ireland there were some signs of manufacturing slowing a bit, with the PMI down from 59.1 in July to 55.1 in August – this suggests expansion, but at a somewhat slower pace.

Many of the big international broking houses continue to argue that we are not heading for a major market downturn, though they do now introduce notes of caution into their predictions.

This morning in a note to clients UBS says it continues to believe that Europe can edge back to stronger growth, helped by lower interest rates and low oil prices. and that this will support equity prices. However it adds that “ downside risks need to be taken seriously”.

UBS estimates that each 1 per cent off Chinese growth would trim 0.1 – 0.3 per cent from already lacklustre European growth, and a bit more if the trouble spilled over to other emerging markets. Germany has the highest exposure, selling close to 6 per cent of its exports to China, though its recent figures have been fine.

All the signs are that this uncertainty now has a way to run, particularly if you add in the debate over when the US Federal Reserve Board will start to increase US interest rates. Those who followed the old market advice “ sell in May and go away” are, for the moment, sitting pretty.