(Reuters] – Markets should be cautious this week because of rising geopolitical tensions throughout central and Eastern Europe. Also, gas prices are expected to rise.

Black Friday will see American shoppers get ready while investors look at Fed minutes and inflation data for clues about how price pressures affect interest rates. What will happen to Kiwi rates?

1. BLOWING HOT AND COOL

Relations between Russia and the West have been at their most frosty since the Cold War – but are they about to get hotter? Russia’s Vladimir Putin asserts that the West does not listen to its “redlines”, warning against NATO infrastructure deployment in Ukraine. NATO has warned Kyiv that Russian troops have been moving across Ukraine’s borders.

The Ukrainian bond market has collapsed and Moscow is waking up. Hungary and Poland have also seen their currencies and stock fall. However, the majority of conflict lies on the market. This year’s 350% price rise will fuel inflation and hinder growth.

The markets are watching for potential tensions around Russia’s Nordstream 2 pipeline worth $11 billion. This is opposed by the U.S., Ukraine and Germany. After its certification was suspended, Russian gas flow to Europe eased and prices fell back to 100 Euros per megawatt hour. Gas prices, https://fingfx.thomsonreuters.com/gfx/mkt/lgpdwnggevo/gas.PNG

2/ UNEVEN BREAKEVENS

You can find clues in the minutes of Wednesday’s Federal Reserve meeting from November.

U.S. consumer prices rising at the fastest pace in more than three decades in October and accelerating inflation expectations have lifted expectations that the Fed will need to speed up tapering of asset purchases and hike rates faster-than-expected.

Records have been set for both the 10-year and 5-year breakeven rates – which is the yield spread between normal Treasuries and inflation protected Treasuries. More fodder comes from Wednesday’s reading of the October personal consumption expenditures (PCE) price index – the Fed’s preferred inflation gauge – expected to rise to 0.4%, according to a Reuters poll. Breakeven inflation rates, https://fingfx.thomsonreuters.com/gfx/mkt/gkplgdqylvb/MicrosoftTeams-image%20(17).png

3/RETAIL RODEO

Black Friday is the beginning of key holiday shopping periods. Recent news from retailers has been generally good as shoppers returned to stores following a U.S. vaccine-fueled reopening.

That’s been reflected in retailers’ shares: The retailing exchange-traded fund is up 15% this quarter, compared with a 9% gain for the S&P 500. According to Refinitiv data, the growth in consumer discretionary earnings – which includes many retailers – has increased from 8% at October’s start to 14.5%.

However, global supply-chain issues crimp inventories and push up prices are still a concern: Walmart shares (NYSE:) tumbled following high labour costs and increased supply chain costs that ate into margins.

Inflation is also causing markets to be concerned about tightening consumer belts. Recent retail sales figures made it easier to read, with October sales rising as Americans began shopping earlier than usual in an effort to combat supply shortages. Retail rodeo, https://fingfx.thomsonreuters.com/gfx/mkt/zjpqkwdzwpx/Pasted%20image%201637183327127.png

4/ GROWTH VS. COVID

In the coming days, the flash November purchasing manager’s index (PMI), an important forward-looking economic indicator, will be released from several major economies, including the United States of America, Australia, Britain, and the Euro area.

The market is focused on the impact that price pressures, supply shortages have on business activity. These Euro-area PMIs are strong and can give an idea of how much COVID-19 could impact business activity.

Angela Merkel of Germany warns that the coronavirus situation is dire in Germany’s powerhouse economies. She also says the Netherlands has been placed in partial lockdown, and Austria is under increasing pressure to act. Those fears are alleviated somewhat by vaccination rollouts and the reassuring – but substantial – presence ECB stimulus. Euro zone PMIs and COVID-19, https://fingfx.thomsonreuters.com/gfx/mkt/zdvxongxxpx/theme1811.PNG

5/A NOT SOO FLIGHTLESS KIWI

On Wednesday, the Reserve Bank of New Zealand will move further into the forefront of inflation fighters and announce a second rate increase in just a few months. The unemployment rate is at its lowest point in a decade since October when the RBNZ and Norway joined the developed market’s first hikers. Inflation has shot up to an all-time high of 101%. Rates will increase, traders believe, but they also have two concerns: There’s a 40% chance of a massive 50bps hike, while the bank increases its long-term rates outlook. Both could lift the rates higher but both carry risks for local borrowers who have been hit hard by mortgage rate increases at the highest pace in fifteen years. Kiwi rates primed for liftoff, https://fingfx.thomsonreuters.com/gfx/mkt/lbvgnbynapq/Pasted%20image%201637210870403.png