Sujata Rao gives a look at what’s ahead for markets.

On Wednesday, the U.S Federal Reserve allows bonds to mature. It will not replace the bonds. This is known as quantitative tightening. Although it aims to release $95billion per month, the Fed will begin June at a less sluggish $45 billion pace.

While the QT plans may be well known, there is always a chance that the largest Treasuries holder in the world will withdraw its presence from the market.

In the meantime, the European Central Bank will reduce its net asset purchases by 20 billion euro for June.

Bank of Canada is set to announce its second consecutive increase of 50 basis points in interest rates. As policymakers are focused on the inflation rate of nearly 7%, they will likely increase these rates.

It is easy to understand their trepidation. Oil prices have seen six consecutive months of increases, threatening inflation’s hopes. As the European Union reduces oil imports from Russia, markets could get tighter.

Data from Tuesday showing an increase in U.S. consumers’ confidence was a clear indicator of the impact of oil prices.

The figures released Wednesday show that British retailers raised their prices last month at the fastest pace for over 10 years, while food and fuel costs dropped. German retail sales dropped 5.4%, compared with 0.2% expected in April. Consumers are feeling the pinch due to higher prices.

Data earlier showed that China’s current lockdowns have severely impacted global supply chains. Manufacturing activity has been slowing in Asia.

The lockdowns have ended and Shanghai residents can now leave their homes to drive their cars as of Wednesday. This could give more fuel to the oil market.

But it is a brand new month. European markets are getting more stable and Wall Street looks set for a stronger start.

After May’s first month of decline since November, Treasury yields have risen across the curve.

Markets should be more informed by key developments on Wednesday

-ECB’s Lagarde, Villeroy de Galhau and Knot, PBOC’s Yi Gang speak at BIS event

Final PMIs

-Euro zone PPI/employment

-St. Louis Fed President James Bullard speaks 

U.S. 30-year Mortgage Rate/ISM New Orders/JOLTS Job Openings

Gamestop, Sprint.