(Reuters] – Market volatility will continue this week as rising tensions between central and Eastern Europe and higher gas prices are likely to keep them in check.

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. How far can Kiwi rates go?

1 – BLOWING HOT and COLD

Relations between Russia and the West have been at their most frosty since the Cold War – could this trend continue? Russia’s Vladimir Putin says the West is not heeding “red lines” https://www.reuters.com/world/europe/putin-says-west-not-taking-russias-warnings-red-lines-seriously-enough-2021-11-18, warning against deploying NATO infrastructure in Ukraine. Russian troop movements at Ukraine’s borders have led NATO to warn https://www.reuters.com/world/europe/nato-warns-russia-over-ukraine-military-build-up-2021-11-15 it was standing by Kyiv.

The Ukrainian bond market has been hit hard by falling prices, while Moscow’s markets have begun to feel the heat. Stocks and currencies have fallen in Poland, Hungary, and Poland. But much of the conflict is playing out on markets https://www.reuters.com/business/energy/russias-gazprom-feels-heat-over-europes-red-hot-gas-prices-2021-10-06, where a 350% price surge this year will fan inflation and hurt growth.

Also, markets are alerted to tensions arising around Russia’s Nordstream 2 pipeline. It is being opposed by Ukraine and the U.S. but supported by Germany. A suspension of its certification saw Russian gas flows to Europe ease https://cn.reuters.com/article/europe-gas-prices-idCNL1N2S80JL, pushing prices back towards 100 euros a megawatt hour.

2/ UNEVEN BREAKEVENS

Minutes from the Federal Reserve’s November meeting https://www.reuters.com/business/with-bond-buying-taper-bag-fed-turns-wary-eye-inflation-2021-11-03 on Wednesday should provide clues on its take on inflation.

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 https://www.reuters.com/article/marketsNews/idUSL1N2S91WK?il=0 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.

3/RETAIL RODEO

Black Friday kicks off the key holiday shopping period https://www.reuters.com/business/retail-consumer/after-rally-us-retailers-investors-eye-upcoming-reports-2021-11-16 and news has been mostly good for retailers in recent months as a vaccine-fueled U.S. reopening sent shoppers back into stores.

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%.

But global supply-chain bottlenecks crimping inventories and pushing up prices remain a worry: Walmart (NYSE:) shares tumbled after high labour https://www.reuters.com/business/retail-consumer/walmart-sets-aside-supply-chain-worries-raise-annual-sales-profit-forecasts-2021-11-16 and supply chain costs ate into margins.

Markets are also worried that consumers will tighten their belts due to the escalating inflation. The recent retail sales numbers were a happier read. They showed that October sales rose as Americans bought earlier to offset supply shortages.

4/ GROWTH VS. COVID

Flash November purchasing managers’ index (PMI), which is a vital forward-looking indicator of economic performance, is expected to be out in a number of countries, including Australia, Britain, Germany, France, and the EU.

Market focus is on what impact price pressures and supply bottlenecks https://reut.rs/3nrR74g are having on business activity and whether these are abating. The Euro area PMIs have been stable and could give an indication of the impact that a rising COVID-19 will take.

Germany’s Angela Merkel warns the coronavirus situation in the powerhouse economy is dramatic https://www.reuters.com/world/europe/germanys-coronavirus-situation-is-dramatic-merkel-says-2021-11-17, the Netherlands is in partial lockdown and pressure is mounting https://www.reuters.com/world/europe/austrian-covid-19-cases-keep-rising-provinces-prepare-full-lockdown-2021-11-18 on Austria to do more. But vaccine rollouts and the reassuring – and hefty – presence of ECB stimulus https://www.reuters.com/business/finance/ecb-must-be-ready-act-if-inflation-proves-more-durable-schnabel-2021-11-17 ease some of those worries.

5/A FLIGHTLESS KIWI

On Wednesday, the Reserve Bank of New Zealand will move further into the forefront of inflation fighting and announce a second rate increase in just a few months. Since October, when the RBNZ joined Norway as developed https://www.reuters.com/business/finance/great-central-bank-exit-begins-norway-hikes-rates-2021-09-23 markets’ first hikers, inflation has surged to a decade high and the unemployment rate has sunk to record lows. Two risks are of concern to traders: There’s a 40% chance that rates will increase, but the hike could be substantial at 50 bps, or the bank may raise its long-term rates outlook. Both could lift the higher but both carry risks for local borrowers who have been hit hard by mortgage rates rising at the fastest rate in fifteen years.