Just as the reflation trade appeared to be finding its latest wind, after a modest rise in oil prices over the past 24 hours (now that Andurand has finished liquidating his book) and a halt to the commodity rout in China, Trump threw the markets for a loop again with his firing of James Comey, which has implications on everything from Trump’s tax policy (most likely delayed due to more infighting between, and within, the two parties) to US geopolitics (will Trump launch another attack, this time against N. Korea to deflect from this scandal?)

“There is no doubt that Trump is dominating proceedings this morning after the sacking of Comey. This is a political story rather than a market story, but yet again it creates uncertainty in the market, which leaves everything the president does with a cloud floating over it,” said James Hughes, chief markets analyst at GKFX in London, quoted by Reuters.

“The Comey news is being treated as a risk-off event, and the headlines were sparking the dollar’s move down,” said Bart Wakabayashi, branch manager for State Street Bank and Trust in Tokyo.

As a result it has been a chaotic, mostly “risk-off” overnight session, in which S&P futures, some Asian markets and European stocks (which yesterday hit the highest level since August 2015) declined on the latest spike in political uncertainty after Trump’s abrupt firing of Comey. The USD weakened vs G-10 peers; in Japan JGBs sold off across the curve after BOJ’s Kuroda acknowledged that QE purchases have become smaller. The USD/JPY fell in response to the latest belligerent North Korean rhetoric in which a North Korean ambassador told SkyNews his country will conduct a 6th nuclear test, the only question is when. In the other Korea, the Kospi opened higher, rising to new records after Moon Jae-in won the South Korean presidential vote, but then erased early gains as the won weakens.

In Europe, continued reaction to U.S. political fallout: Eurodollar and UST curves bull flatten; bunds also supported by dovish ECB paper on labor market slack. GBP/USD whipsaws after re-approaching 1.30 level, GBP crosses drive price action amid little news; crude futures hold gains after bullish API data overnight, energy stocks support. In China the PBOC resumed open market operations after three-day pause, at the same time weakening the yuan fixing to lowest since March 21, however disappointment over the latest China inflation data sent the Shanghai Composite to the lowest since October 17. Crude oil has been little changed; iron ore gains 1%. Australian government bonds rise for first time in five days after Tuesday’s federal budget is seen supporting AAA credit rating;

“All in all, this does not support the view that the U.S. Trumpflation trade faces an easy road ahead of it,” Michael Every, head of financial markets research at Rabobank Group in Hong Kong, wrote in a note. “It underlines that real surprises can pop up out of the box at any time right now.”

As a reminder, all this taxes place with the VIX in single digits, as the market has effectively assumed central banks have eliminated all risks.

While we have a more extensive list of overnight headlines below, these are the 6 main headlines that traders are focusing overnight on the BBG Terminal:

Key Headlines:

• Trump fires FBI director James Comey, citing need to restore ’trust and confidence’
• Pentagon urges North Korea to ’refrain from provocative actions and rhetoric’
• ECB Analysis Paper: labor-market slack might be closer to 15%; this is likely to continue to contain wage dynamics
• France March Industrial Prod. y/y: +2.0% vs +0.6% est.; Italy +2.8% vs +2.5% est.
• BOJ’s Kuroda: annual JGB purchase rate is now approximately JPY60t
• China April CPI 1.2% vs 1.1% estimate; PPI 6.4% vs 6.7% estimate
• Kuroda: Watching effect of FX changes very carefully; weak yen boosts corporate profits

The dollar headed for the first drop in three days in the wake of Trump’s move, and after Federal Reserve Bank of Dallas President Robert Kaplan cast doubt on the pace of rate hikes in the world’s biggest economy. Treasuries advanced, while gold ended the longest run of losses since October. Roche Holding AG was the biggest drag on Europe’s Stoxx 600 Index after a cancer drug failed in a late-stage clinical trial. Oil climbed after the API reported a steep drop in US stockpiles, now extending for a fifth week. Today’s DOE report will be closely watched for confirmation.

The weakness across most markets comes in the wake of gains that sent global stocks to a record. Trump’s dismissal of Comey may threaten to undermine his administration as it attempts to move tax and spending plans through Congress, just as political risks ease in Europe and corporate earnings suggest the global economy is on the mend.

The European STOXX 600 index fell 0.2 percent, led down by construction and materials stocks, having hit its highest since August 2015 on Tuesday. Asian shares, excluding China, edged fractionally higher for a third consecutive day. MSCI’s main index of Asia-Pacific shares, excluding Japan rising 0.1 percent, having earlier matched a two-year high hit last week. The forward 12 month EPS for the index is at its highest level in more than three years. Tokyo shares hit a 17-month high, up 0.3 percent on the day as a relatively weak yen outweighed concerns triggered by Trump’s sacking of Comey.

In the red column, South Korean stocks led losers as investors took profits after liberal leader Moon Jae-in was elected president, while Chinese shares closed lower after factory gate prices ion the world’s second-biggest economy cooled more than expected in April.

The dollar fell 0.1 percent against a basket of major currencies after slipping on the view that political uncertainty could derail Trump’s tax reform plans, the prospect of which has helped lift riskier assets.

The yen, often sought in times of market uncertainty, was last 0.1 percent higher at 113.83 to the dollar. The euro was flat at $1.0870.

Falling U.S. Treasury yields also weighed on the dollar. Ten-year yields were down 3.1 basis points at 2.38 percent after retreating from five-week highs touched on Tuesday as investors made room in their portfolios for new issuance of government and corporate debt.

The most eye-catching move in euro zone government bond markets was a fall in Greek 10-year government yields to their lowest since its debt was restructured in 2012. Athens and its creditors reached a deal this month on reforms that could trigger the release of more rescue funds.

“There is a relief that Greece will get its disbursements to get through the summer, and that is the main driver of the bond rally,” ING’s senior rates strategist Martin van Vliet said.

Oil prices rose after Saudi Arabia said it would cut supplies to Asia and U.S. inventories fell more than expected. Brent crude was last up 51 cents at $49.24 a barrel. Gold rose 0.1 percent to $1,222 an ounce. U.S. inventories fell 5.8mm bbl in API data ahead of more definitive EIA statistics Wednesday. OPEC secondary sources said to see group’s output falling to 31.7m b/d in April. Forties pipeline flow restrictions said lifted. Shell discusses including Russian oil in Brent benchmark. U.S. inventory data due.  Libyan output rose above 800Kbpd.

Market Snapshot

• S&P 500 futures down 0.2% to 2,388.75
• STOXX Europe 600 down 0.2% to 394.96
• MXAP up 0.3% to 150.23
• MXAPJ up 0.1% to 490.00
• Nikkei up 0.3% to 19,900.09
• Topix up 0.2% to 1,585.19
• Hang Seng Index up 0.5% to 25,015.42
• Shanghai Composite down 0.9% to 3,052.79
• Sensex up 0.8% to 30,179.51
• Australia S&P/ASX 200 up 0.6% to 5,875.44
• Kospi down 1% to 2,270.12
• German 10Y yield fell 1.3 bps to 0.417%
• Euro up 0.1% to 1.0886 per US$
• Brent Futures up 0.8% to $49.14/bbl
• Italian 10Y yield rose 3.7 bps to 1.986%
• Spanish 10Y yield fell 1.0 bps to 1.611%
• Brent Futures up 0.8% to $49.14/bbl
• Gold spot up 0.2% to $1,223.49
• U.S. Dollar Index down 0.2% to 99.43

Top Overnight News from Bloomberg

• President Donald Trump fired FBI Director James Comey amid the agency’s investigation of Russian interference in last year’s election, saying the bureau needed new leadership to restore “public trust and confidence”
• Qatar’s royal family asked Germany’s financial regulator for approval to boost its stake in Deutsche Bank AG to more than 10 percent, a signal it may be seeking greater control of Europe’s largest investment bank
• Exxon Mobil Corp. and Petrobras have held talks on a strategic partnership that could involve multiple assets in Brazil and overseas in different segments of the industry, similar to the $2.2 billion deal signed with Total SA in December
• West Corp. agreed to be acquired by Apollo Global Management LP in a deal valued at $5.1 billion including debt
• Three interest rate hikes this year seeming more likely with market at ~80% odds of June boost, 40% for September
• Comey Ouster Threatens to Backfire on Troubled Trump White House
• Toyota Predicts Profit Drop on Stronger Yen, Plans Buyback
• Axa Plans IPO in the U.S., May Return Money to Investors
• Pret A Manger Said to Plan U.S. IPO as Owner Hires Banks
• Exxon, Petrobras Said to Have Discussed Strategic Partnership
• SoftBank Said Near Closing Technology Fund With $95 Billion
• Goldman Sachs Executive Compensation Plan Targeted in Lawsuit
• Credit Suisse Adding Jobs in N. Carolina as It Gets Tax Break
• Disney CEO Says ESPN Looking at Program Changes, Mobile Growth
• Apple Buys Sleep Monitoring Startup Beddit; No Terms Disclosed
• Senate Schedules Vote to Roll Back Obama Methane Regulation

Asia equity markets slightly higher as the region shrugged off the indecisive lead from US, where stocks were pressured in late trade amid geopolitical concerns after provocative rhetoric from North Korea. ASX 200 (+0.5%) was choppy in early trade after the budget release as large banks suffered from the announcement of a AUD 6.2bIn levy. However, the financial sector then recovered as smaller banks welcomed exemptions from the levy which would only impact banks with liabilities of over AUD 100bIn. Nikkei 225 (+0.26%) benefitted from a weaker currency after USD/JPY briefly reclaimed 114.00 during US hours. KOSPI (-0.7%) initially extended on record highs on post-election euphoria, before the honeymoon period was abruptly cut short on profit-taking and as participants mulled the impact of the leftist win on the conglomerates. Shanghai Comp. (-0.9%) was initially kept afloat after the PBoC injected CNY. 110bIn through reverse repos and CNY 47.6bIn via its Pledged Supplementary Lending facility. 10yr JGBs were marginally lower amid the positive risk sentiment in the region, although losses were stemmed by the BoJ’s presence in the market for a total JPY 1.03trl in JGBs. BoJ Summary of Opinions for April 26th-27th meeting stated that Japan’s economy has been turning to a moderate expansion and is likely to maintain growth above potential mainly through fiscal 2018. BoJ also stated that CPI is likely to increase towards 2% and although prices are sluggish recently, they are likely to start increasing as the economy maintains its moderate expansion.

Top Asian News

• China Sells Five-Year Government Debt at Highest Cost Since 2014
• China Factory Price Gains Ease as Commodity Market Surge Abates
• Moon Vows to Seek Peace With North Korea, Take On Companies
• Kuroda Concedes Pace of JGB Buying Is Well Below BOJ Guideline
• Regulatory Restrictions Loom Over 17 Indian Banks, Moody’s Says
• Silk Road Lure Stokes Chinese Demand for Sri Lanka’s Bonds
• TSMC Posts Lowest Monthly Sales Since 2014 Ahead of New iPhone
• Hong Kong Stocks Rise to 2015 High as Shanghai Extends Losses
• Japan Tobacco Falls Further Behind in Race for E-Cigarettes

European equities trade mostly lower (Eurostoxx -0.5%) in a continuation of some of the downbeat sentiment seen late in the US session which was initiated via inflammatory rhetoric from the North Korean Ambassador. Furthermore, markets are also placing some focus on President Trump’s decision to remove FBI director Comey and the potential political backlash given Comey’s involvement in the ongoing Russian investigation. In terms of sector specifics, losses are relatively broad-based with the only sign of green in Europe coming from the energy sector as WTI reclaimed USD 46.00 in the wake of last night’s API release with OPEC-related rhetoric relatively light thus far. From a fixed income perspective, markets have broadly benefitted from the general risk-aversion in the market place. Elsewhere, some desk have noted the recent FR/GE spread tightening and suggest that Asian investors have been capitalising on this front by selling shorter-dated French paper. Peripheral markets trade modestly tighter to the German benchmark with this largely attributed to a slight reversal of yesterday’s widening.

Top European News

• ECB Says Slow-Declining Labor-Market Slack Poses Wage Hurdle
• EON’s Disposal of Remaining Uniper Stake to Happen ‘Soon’: CEO
• Italian Industrial Output Rises in Boost for Economic Recovery
• EDF to Ask Macron for Helpful Rules for French Nuclear Fleet
• Eni Generates Most Cash in 7 Quarters as Projects Prepared
• ING’s Growth Push Away From Home Helps First-Quarter Profit Jump
• Compass Group Investors Set for 1 Billion-Pound Cash Windfall
• Pandora Extends Decline; Danske Says Transparency Has Weakened
• TalkTalk Slides After Dividend Cut, Weaker Earnings Outlook

In currencies, the Bloomberg Dollar Spot Index lost 0.1 percent after climbing 0.4 percent Tuesday. The euro was little changed at $1.0869, while the pound gained 0.1 percent. A choppy morning in FX as traders push for some key levels in GBP; notably Cable into 1.3000, but as many have anticipated, some very strong offers up here, not least of all from option traders who have decent leverage up there. We have pulled back into the mid 1.2900’s since, but EUR/GBP is also under pressure, with M&A related flow also adding to the GBP bid this morning. Speculation that Unilever is to sell its spreads division has permeated through the market after some financing activity in the debt markets. Elsewhere, USD/JPY has had another look above 114.00, but fails to maintain a foothold as US Treasury yield tails off a little. Buyers have come back in from circa 113.75-80 as a rate path expectation have turned a little hawkish again. EUR/USD is still testing the 1.0850-80 support zone as USD bulls look to reinforce the upper hand. Some of the pressure looks to be coming through EUR/GBP as mentioned above.

In commodities, West Texas oil climbed 1 percent to $46.32 a barrel, resuming gains after dropping 1.2 percent on Tuesday. Copper erased earlier gains to trade 0.2 percent down at $5,501.50 a ton on the London Metal Exchange. Geopolitical concerns rear their ugly head again, with North Korea saying they will continue with their missile testing, whilst threatening to ‘turn’ US strategic assets to ‘ashes’. It is a modest reaction into the safe haven precious metals, which are taking a stronger lead from the USD, which is clearly on the front foot. Elsewhere, Oil prices are resisting selling interest, getting some temporary reprieve from the API report last night reporting a 5.8mln draw down in Crude. If DoE’s add some weight to these numbers, then we could see a little more than the modest upside seen since. Base metals continues to meander towards the recent lows, with Copper struggling below USD2.50.

Looking at the day ahead, we are due to get the April import price index reading (expected to print at +0.1% mom) and April monthly budget statement. Away from the data the Fed’s Rosengren is once again scheduled to speak, this time at 12pm ET while Kashkari speaks again at 1.20pm. ECB President Draghi is also due to address Dutch parliament at noon so worth keeping an eye on that. Away from this, US Secretary of State Rex Tillerson is due to meet with Russia Foreign Minister Sergei Lavrov today. The EU’s leader in the Brexit negotiations, Michal Barnier, is also due to answer questions on Brexit from Spanish lawmakers this afternoon.

• US Event Calendar
• 7am: MBA Mortgage Applications, prior -0.1%
• 8:30am: Import Price Index MoM, est. 0.1%, prior -0.2%
  • Import Price Index ex Petroleum MoM, est. 0.1%, prior 0.2%
  • Import Price Index YoY, est. 3.6%, prior 4.2%
  • Export Price Index MoM, est. 0.2%, prior 0.2%
  • Export Price Index YoY, prior 3.6%
• 2pm: Monthly Budget Statement, est. $179.0b, prior $176.2b deficit

Fed Speakers

• 12pm: Fed’s Rosengren to Speak on Economy at Vermont Business Group
• 1:20pm: Fed’s Kashkari Holds Q&A at Minnesota Business Ethics Awards

DB’s Jim Reid concludes the overnight wrap

I was casually flicking through the channels last night and was unlucky enough to stumble on the first semi-final of the Eurovision Song Contest. However in the brief moment I tuned in I was fortunate enough to see the act from Montenegro. It was a guy with what looked like a receding hairline but with a meter long plait on top of his head that was swung around aggressively during his performance. I really hope he made it through and if he did I am pretty sure he’ll beat the UK’s entrant on what is our first taste of the European public opinion on us Brits post the Brexit vote. I’m expecting a big backlash, if so.

If Montenegro was the excitement overnight, equity markets were the boredom. The S&P 500 (-0.10%) managed yet another sub +\- 0.20% close – the ninth in the last ten trading days. By our estimates this has only ever happened on 3 other occasions based on the history of S&P 500 returns back to 1928, all of which came in 1961. To best illustrate the lack of excitement yesterday the intraday range on the S&P 500 until the last hour of trading was an incredibly small 0.32%. Some North Korea headlines on Sky News at the close suggesting that a sixth nuclear test is imminent saw the index dip lower into the closing bell although the full story was a bit less clear as the details emerged.

Unsurprisingly given the above, measures of volatility continue to hover at or near historically low levels. After closing at 9.77 on Monday and the lowest since December 1993 (when it closed at 9.31), the index touched an intraday low of 9.56 yesterday before rising a bit into the close to finish at 9.96. Still, that is only the second sub-10 close of in 2017 and in fact as we noted yesterday you’d have to go all the way back to November 2006 to find the last time we had a sub-10 close. Yesterday was also the 11th day in a row that the VIX has closed below 11. That is a new record long streak for the index (with data going back to 1990). The previous record run was 10 days set back in 2006 while there have been 3 separate occasions where it’s managed this 9 times in a row. Over in Europe the VSTOXX closed down at 14.09 (-2.13%) and is slowly edging back towards its YTD lows in March. Equity markets in Europe were generally positive after rebounding from Monday’s post French election profit taking. The Stoxx 600 (+0.45%) closed at a 21-month high, while the CAC returned +0.28%.

There was one exciting milestone in equity markets yesterday however. Apple closed with a market cap of over $800bn ($803bn to be precise), the first US company to achieve such a feat. This time last year Apple’s market cap was ‘only’ $508bn. To put it in perspective, Alphabet (Google parent company) has the second largest market cap of any US company at $653m. Amazingly Apple’s market cap alone is about the same as the sum of the smallest 103 S&P 500 companies’ market caps.

Elsewhere, in bond markets yesterday European govies were under pressure with yields in the periphery 3-4bps higher. 10y Bund yields also edged up 1.4bps to 0.427% with the price action appearing to reflect a combination of the stronger day for risk and comments from Germany’s Finance Minister Schaeuble who suggested that normalization of ECB policy will start “shortly”. Treasury yields followed the move in Bunds (10y +1.1bps to 2.399%). Interestingly these moves came in the context of another leg lower for Oil with WTI closing below $46/bbl (-1.18%) again, although it has recovered somewhat this morning.

Over in Asia bourses are for the most part firmer this morning. The Nikkei (+0.30%), Hang Seng (+0.67%). Shanghai Comp (+0.15%) and ASX (+0.45%) are all up. The Kospi (-0.69%) is weaker although that partly reflects some strengthening in the South Korean Won after the country’s new president was sworn in earlier today. Meanwhile the latest inflation data was released in China this morning. Headline CPI in April has risen to +1.2% yoy (vs. +1.1% expected) from +0.9% in March, boosted by rising non-food prices. Meanwhile PPI has fallen back to a still elevated +6.4% yoy (vs. +6.6% expected) from +7.6%. That is  actually the slowest pace since December but still marks eight consecutive months of rising prices after 54 months of factory price deflation.

The other breaking news to report overnight is that of President Trump announcing that he has dismissed FBI Director James Comey. This comes in the midst of an investigation into contact between Russian officials and Trump’s presidential campaign. Trump confirmed that the bureau needs new leadership in order to restore “public trust and confidence”. One implication of this for markets could be that it distracts from some of the more market-focused reform progress that we’re still waiting for.

Moving on. There was another decent round of Fedspeak for investors to dig through yesterday, most of which was focused on the balance sheet debate. Rosengren said that the balance sheet normalization process won’t be disruptive and that the process itself should be “highly tapered”. The Boston Fed President did cite some concerns about the commercial real estate market however, saying that there could be a “potential and significant shock” should government-sponsored enterprises be required to reduce holdings of multifamily loans in the future. Meanwhile the Fed’s George reiterated her call for the Fed to begin shrinking reinvestments later this year, saying specifically that the process can start with reducing MBS and USTs then leaving runoff on “autopilot”. Late last night the Fed’s Kaplan said that he still views 3 rate hikes this year as appropriate.

In terms of the macro data yesterday, in the US the NFIB small business optimism reading printed at 104.5 in April (vs. 104.0 expected), albeit still at high levels relative to recent years. JOLTS job openings for March showed the number of vacancies as nudging higher and the quits rate holding steady at 2.1%. Finally wholesale inventories rose +0.2% mom in March which was an upward revision relative to the initial flash release. In Germany we learned that industrial production declined -0.4% mom in March which has lowered YoY growth to +1.9%. Over in France the Bank of France business sentiment reading was slightly higher in April at 104 from 103.

Looking at the day ahead, this morning in Europe it looks set to be fairly quiet with the only data of note being trade data and industrial production data in France. In the US this afternoon we are due to get the April import price index reading (expected to print at +0.1% mom) and April monthly budget statement. Away from the data the Fed’s Rosengren is once again scheduled to speak, this time at 5pm BST this evening, while Kashkari speaks again at 6.20pm BST. ECB President Draghi is also due to address Dutch parliament at noon so worth keeping an eye on that. Away from this, US Secretary of State Rex Tillerson is due to meet with Russia Foreign Minister Sergei Lavrov today. The EU’s leader in the Brexit negotiations, Michal Barnier, is also due to answer questions on Brexit from Spanish lawmakers this afternoon.

After two days of disappointing macro data out of China, with trade numbers missing expectations on Tuesday following by another drop and miss in producer prices overnight, the “great decoupling” between China stocks and both the S&P500 as well as the rest of the world continued, and the Shanghai Composite dropped another 0.9% to 3,052 to the lowest level since mid-October. Gauges of industrial, utilities and materials shares fell the most on CSI 300 Index, while the ChiNext small-cap gauge droped 0.9%, while the divergence with offshore Chinese stocks continued: MSCI China +0.8%, set for highest close since July 2015. In short: it’s Chinese stocks against the rest of the world.

Furthermore, it’s not just stocks as China’s bond sell-off continued amid deleveraging concerns, leading China to sell five-year government debt at the highest cost since 2014.

To be sure, there have been various explanations for this ongoing decoupling, many of which were noted here previously, and most have to do with either China’s shadow bank crackdown, the ongoing monetary tightening by the PBOC, the recent plunge in commodity prices leading to accelerating margin calls and asset liquidations, and in general concerns about China’s record debt load.

Below we present yet another take, this time from Kyoungwha Kim, a reporter and markets blogger who writes for Bloomberg, who is of the view that “China’s Deleveraging Dominates Positive Fundamentals”

Macro View:

 

It’s likely the government’s drive to enforce financial deleveraging will outweigh all the positives which otherwise might have prompted a rebound in China’s equity market.

 

The Shanghai Composite has lost 1.2% in 2017 versus a 15% advance in the MSCI EM Index

 

So far there’s no sign of relaxation in its drive to quell financial leverage. China’s insurance watchdog is looking into insurers’ major investments in stocks and property, while the securities regulator is said to be conducting a nationwide scrutiny on brokerages’ malpractice.

 

China’s economy and earnings remain strong despite signs of moderation. Industrial companies’ profits jumped 24% in March from a year ago, extending a surge from the first two months of 2017.

 

Speculation about massive infrastructure projects has returned. President Xi Jinping, who proposed the “One Belt, One Road” initiative in 2013 to spur greater global economic integration, convenes a summit in Beijing next week, hosting 28 heads of state including Vladimir Putin. This plan, estimated by Credit Suisse to fuel investments worth as much as $502 billion into 62 countries over five years, is reviving speculation that SOEs will benefit.

 

Hopes for MSCI inclusion in June are still alive, after the number of mainland companies for inclusion was cut to 169 from 448. A positive decision would provide some fuel to a market suffering from a liquidity drought.

 

The positives may serve as a stabilizer to keeping the SHCOMP from breaking below 3,000, but they won’t be enough to catch up with the EM rally — unless the government alters its stance.

END

With the entire world’s focused on the last remaining reflationary dynamo in the world, China, today’s inflation data out of Beijing, fabricated as it may be, was closely watched.  After all, just one month ago, UBS declared China‘s reflationary phase over, and a dark, deflationary era of negative credit impulse-driven deflation would soon be unleashed on the world. Again.

It wasn’t quite so dramatic.

After surging to almost 8% at the start of 2017, the fastest pace in 9 years, PPI declined for a second consecutive month, slowing to just 6.4% YoY in April, down 0.4% from March, and missing expectation, confirming (as if it was needed) that China’s commodity boom is now in the rearview mirror.  The accelerating producer price plunge has been all too obvious to those who have watched the recent crash (most recently previewed here) in Chinese iron ore and coal prices, which tumbled after rising sharply on a construction boom, or rather bubble, that drove China’s strongest economic growth since 2015.

At the same time consumer prices rose fractionally more than expected, although CPI remained at just 1.2% YoY, up from 0.9% in March. This was driven entirely by non-food inflation which jumped 2.4%, while food inflation plunged 3.5% from a year ago.

And in the backward logic of the “good is good and bad is great” world, the burst commodity bubble (declining PPI)  and lower purchasing power (rising CPI) allowed the  PBOC to be a little more generous with its liquidity, ending the three drought of no reverse repos, even if the central bank still drained a net of CNY80 billion today, and so Chinese stocks are higher… for now.