Japan's manufacturing sector experienced a broad-based slowdown in May

Markets will be looking for confirmation as to whether or not that is the case with IHS Markit due to release flash manufacturing and services PMI reports for the Eurozone, Germany, France and the United States later in the session.

While most came in above 50 — indicating that activity levels continued to improve — there was a clear deceleration compared to the levels reported in April.

Of note, output grew at a slower pace while new orders and new export orders — lead indicators on activity levels in the months ahead — also grew at a slower pace than April.

Fitting with the deceleration in activity levels, order backlogs declined after several months of growth while hiring levels and stock purchases also moderated.

Input and output prices also grew at a slower pace, suggesting that inflationary pressures across the sector may be already starting to ebb.

"May’s PMI data signaled a broad-based slowdown in growth of the manufacturing sector, with output, new orders and employment all rising at their slowest rates since last November," said Paul Smith, senior economist at IHS Markit

"Although growth is being maintained at a decent clip, reports of ‘wait-and-see’ attitudes amongst clients, excess warehouse inventories and recent sharp rises in raw material costs all served to undermine expansion during the month."

While not a horrible report — activity levels still improved albeit at a slower pace — it suggests that activity levels across the global manufacturing sector may be starting to moderate after a strong rebound from the middle of last year.