Indexes that are based on the opinions of purchasing managers, who are the people who buy things for companies, give a full picture of how an economy is doing. Since there are a lot of worries about a recession, the advance readings for June, which are due Thursday in the developed world, are very important.
Japan has set a sad tone by showing that factory growth is at a four-month low and that delivery times from suppliers are still getting longer. European and U.S. PMIs, which are the names for these indexes, have been going down over the past few months, moving steadily toward the 50-mark that separates growth from contraction.
This is likely to have kept going on in June.
PMIs (https://fingfx.thomsonreuters.com/gfx/mkt/movanrnggpa/Pasted%20image%201655303398569.png)
Fears of a growth slump haven’t been eased by either the data or what policymakers have said. Fed Chairman Jerome Powell acknowledged the worry on Wednesday, but he made it clear that the bank will focus on getting inflation back down to 2%, which means that policy will be tightened no matter what.
In the same way, the latest Reuters polls predict that interest rates in the euro zone will be 0.75 percent by the end of the year, which is 1.25 percentage points higher than where they are now.
One interesting change can be seen in commodity markets, especially those that are tied to economic growth.
Copper and oil have done well so far, despite the fact that the supply picture looks bad. Now, though, Brent crude has dropped below $110 a barrel and copper is at its lowest point in 16 months.
This is good for energy and materials stocks, which were popular with investors when inflation went up but might not be if stagflation turns into a recession. On Wednesday, energy stocks fell by 4.2% on Wall Street, and it looks like another dull day for world stocks.
Norway and many other emerging markets are expected to raise interest rates in the near future.And Powell will be on the wires again, testifying before a House committee.
Key events that should give the markets more direction on Thursday:
–Indonesia’s holding rates were seen to be 3.5%
–Rates in the Philippines will go up 25 basis points, or 2.5 percent.
ECB bank watchdog Andrea Enria talks
-A meeting of the Norwegian Central Bank
-Meeting of the European Council (to June 24).
–Mexico could raise interest rates by 75 basis points to 7.75%.
-Turkey’s Central Bank
Egypt’s rates could go up by 50 basis points to 11.75 percent.
-Current account of the U.S.
-An auction of U.S. 5-year TIPS
