New border restrictions halt retail milk imports to China; China CPI stable but food prices jump; Aussie property investors see default risk rise; UST 10yr yield 1.72%; oil and gold up; NZ$1 = 68.6 US¢, TWI-5 = 71.5

Here's my summary of the key events overnight that affect New Zealand, with news of an unexpected threat to some retail dairy trade with China.

On Friday, a new tax law in China came into effect on e-commerce trading and duty-free entry points into the country. As part of its implementation, the country's authorities issues a safe-harbour list of permitted products - but wholemilk powder and UHT milk are not on the list. In fact, many things are not on the list, but these two affect New Zealand directly. Travelers returning with them need to abandon them at the airport. But we should note that infant formula is not affected; it is on the list.

Websites selling non-listed products directly to consumers have pulled them from their services and that includes dairy products. The situation is a bit chaotic at present. The new law is specifically designed to tax cross-border trade to the advantage of local manufacturers.

However wholesale channels are unaffected, neither is using the official China Post channel, apparently. You do wonder how this ban works with our FTA agreements, in the way it has shut down the e-commerce retail channel for affected products cold. There will no doubt be behind-the-scenes activity going on at a diplomatic level, but much more than New Zealand's 'retail' milk trade is affected so how quickly and sympathetically things will get resolved is very unclear. The perils of dealing with an all-powerful, one-party state where the 'rule of law' means something different to what we imagine. China denies there is any problem.

Staying in China, consumer inflation held at +2.3% year-on-year in March, and unchanged from the rate in February. But eyes will be drawn to the +7.6% rise in food prices nested within the overall data, which is an unexpected jump. A shortage of pork is behind the rise. On the other hand, producer prices fell -4.3% year-on-year - but that is its lowest decline in a long time. Month-on-month China's producer prices actually rose +0.5%, their biggest climb in over two years.

And in Australia, Moody's is warning that because yields have fallen so low for residential investment properties in both Melbourne and Sydney, there is rising risk in these investor markets. The deteriorating affordability of servicing investment properties makes residential property investors more vulnerable to risks such as loss of income, interest-rate increases, vacancies or rent reductions, and therefore increases their probability of default, they say. Yields in New Zealand, especially Auckland, exhibit very similar vulnerabilities.

In New York the benchmark UST 10yr yield is unchanged at 1.72%.

The oil price is still rising. It is now over US$40/barrel in the US, while Brent is now just under US$43/barrel.

The gold price is also up, with a $14 rise today to US$1,256/oz.

And finally, the NZ dollar starts today at the upper end of its range having risen overnight to 68.6 US¢ on a weaker greenback, at 90.3 AU¢, and at 60.1 euro cents. The TWI-5 index is now at 71.5.

If you want to catch up with all the local changes yesterday, we have an update here.

The easiest place to stay up with event risk today is by following our Economic Calendar here ».