Marketmind: What purchasing managers are saying

© Reuters. FILE PHOTO: Workers install a battery for a new electric vehicle model at Mitsubishi Motor Corp's factory in Kurashiki, Japan May 19, 2022. REUTERS/Satoshi Sugiyama/File Photo

A look at the day ahead in markets from Sujata Rao

Indexes based on the views of purchasing managers, essentially the folks who buy products for companies, give a comprehensive indication of the state of an economy. So, with recession worries swirling, advance readings for June, due Thursday across the developed world, have taken on particular significance.

Japan has set a dour tone, showing factory growth at four-month lows and suppliers' delivery times continuing to lengthen. European and U.S. PMIs, as these indexes are known, have slipped in recent months heading steadily towards the 50-mark that denotes the separation line between expansion and contraction.

This trend is expected to have continued in June.

GRAPHIC: PMIs (https://fingfx.thomsonreuters.com/gfx/mkt/movanrnggpa/Pasted%20image%201655303398569.png)

Neither data nor policymakers' utterances have soothed fears of a looming growth funk. Fed Chairman Jerome Powell on Wednesday acknowledged the concern but was clear that the bank will focus on getting inflation back down to 2% -- effectively committing to tighten policy no matter what.

Similarly, latest Reuters polls forecast euro zone rates at 0.75% by year-end, 1.25 percentage points above current levels.

One interesting shift is visible on commodity markets, especially those linked to economic growth.

Copper and oil have appeared until now, impervious to the darker outlook due to tight supply picture. Now though, Brent crude has plunged to mid-May lows below $110 a barrel and copper is at 16-month lows.

That's feeding into energy and materials stocks; popular with investors as inflation soared, they may be shunned if recession replaces stagflation as the main scenario. Wednesday's Wall Street session saw energy stocks drop 4.2% and world stocks look set for another lacklustre day.

Central banks will plough on regardless, with Norway expected to raise interest rates later on, alongside a host of emerging markets. And Powell will be on the wires again, testifying before a House committee.

Key developments that should provide more direction to markets on Thursday:

-Indonesia seen holding rates at 3.5%

-Philippines rates to rise 25 bps to 2.5%

-ECB bank supervisor Andrea Enria speaks

-Norway Central Bank meeting

-European Council meeting (to June 24).

-Mexico may hike interest rates by 75 bps to 7.75%

-Central Bank of Turkey

-Egypt seen hiking rates by 50 bps to 11.75%

-U.S. current account

-U.S. 5-year TIPS auction