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 rear view 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.