US retail sales up; US inventories healthy; IMF says China needs local govt reform; attracted despite discrimination; UST 10yr at 2.83%; oil down and gold up; NZ$1 = 73.6 USc; TWI-5 = 74.6

Here's our summary of key events overnight that affect New Zealand, with news there is new data about why China needs urgent reform.

But first, the advanced data on American retail sales came in better than markets were expecting, up +0.6% from February and up +4.5% from March 2017. The good result was essentially driven by better car sales. Also, petrol sales were up almost +10% year-on-year, and online sales showed the same strong gains. But the overall sluggish non-car sales gains are in contrast to better employment and stronger paychecks in the American labour market.

One reason sales look lacklustre is the lack of price inflation. A good example is milk. Americans are turning away from milk to other beverage options, and as non-dairy substitutes gain popularity. In March, one litre of whole milk fell to about NZ$1.05 at US grocery stores, the cheapest in 14 years.

US business inventory levels are not showing any stress. Relative to sales they are not especially high and the sales/stock ratio is very similar to what it was a year ago.

China needs serious local government reform, says the IMF. Almost 90% of its government spending it done by a myriad of decentralised local government across 31 provinces, 334 prefectures, 2,850 counties, 40,000 townships and 900,000 informal village jurisdictions. It is a sprawl that is extremely hard to co-ordinate and is open to corruption. It also has an insatiable appetite for funding which the IMF sees as an urgent area of reform.

In Shanghai, more than half the Australian companies operating in China say they are not treated equally to their domestic competitors, and doing business in the world's second-largest economy is getting harder. They also say they are prepared to put up with the discrimination because the prospects are rich.

In Australia yesterday, a lesson on our addiction to IT and automation. Woolworths supermarket chain had an IT outage that meant they couldn't operate any checkouts. During the 30 minute outage, some stores closed and advised shoppers to abandon shopping carts mid-aisle.

The UST 10yr yield is up today at 2.83% (+1 bp). The US 2-10 rate curve is moving lower. The Chinese 10yr is at 3.72% (-2 bps) while the New Zealand equivalent is at 2.85% (+1 bp).

Gold is at US$1,347/oz in New York, up +US$2 today. And in an ominous sign for the yellow metal, China is reporting demand is down more than 5%.

And we should also note that aluminium prices have jumped on the international sanctions against Russia, along with the American tariff threats that include the metal. Aluminium prices are now at a seven year high.

Oil prices have fallen by more than -US$1 today and are now just over US$66/bbl and the Brent benchmark just over US$71.50/bbl.

China is signaling that its island province of Hainan may start a program to ban internal combustion engines and go all-electric. It will take a number of years, however.

The Kiwi dollar is virtually unchanged this morning and still at 73.6 USc. On the cross rates we are at 94.7 AUc and 59.5 euro cents. That puts the TWI-5 at 74.6, anchored near the top of its 2018 range.

Bitcoin is now at US$8,014 which is a -3.5% slip from this time yesterday.

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