Rex Tillerson, U.S. secretary of State, during a media briefing (Photographer: Andrew Harrer/Bloomberg)  

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President Trump fires Secretary of State Rex Tillerson,  Japan’s land-sale scandal threatens Abe’s economic agenda, and China may be about to report some ugly data. Here are some of the things people in markets are talking about.

So Long, Rex

President Donald Trump ousted U.S. Secretary of State Rex Tillerson on Tuesday, ending a rocky tenure in an abrupt move that stunned the former Exxon Mobil Corp. CEO and set in motion a shakeup of the administration’s foreign policy team. Trump announced Tillerson’s firing in a tweet shortly before 9 a.m. Washington time after weeks of staff turmoil, saying he would nominate CIA Director Mike Pompeo to fill the void. But it was several hours before Trump discussed his decision with Tillerson, who never really clicked with Trump (and who has had a really bad week). U.S. equities fell for a second day, in part as the departure has investors waiting for more shoes to drop at the White House, especially when it comes to trade policy.

Japan Scandal Threatens Economy

The controversy stemming from the sale of land to an educational institution with ties to Japanese Prime Minister Shinzo Abe is threatening to derail March’s crowded policy calendar and throw the government’s plans for the economy into disarray. Opposition parties are boycotting budget hearings parliament has yet to confirm the central bank’s new leadership team, and the finance minister’s trip next week to a Group of 20 meeting in Argentina is in doubt. The administration also has to try to shepherd labor market reforms through the Diet after dropping key proposals due to erroneous data, and respond to Trump’s recently announced steel and aluminum tariffs. While Abe’s ruling coalition has the numbers to win votes on these issues, forcing through legislation without talking to opposition parties could further damage his popularity.

Power to the PBOC

In the midst of an historic three-year battle against systemic financial risks threatening to crash China’s economy, President Xi Jinping has become the latest strong leader to take on entrenched interests in the country. China is giving its central bank the power to write the rules for the financial sector, as part of a sweeping overhaul aimed at closing regulatory loopholes and curbing risk in the $43 trillion banking and insurance industries. The China Banking Regulatory Commission and the China Insurance Regulatory Commission will be merged in the biggest industry overhaul since 2003. Some of their functions, including drafting key regulations and prudential oversight, will move to the People’s Bank of China, according to a proposal unveiled Tuesday during the National People’s Congress.

U.S. Inflation Scare Recedes

U.S. consumer prices in February were just right to reinforce the outlook by Fed policy makers for three interest-rate hikes this year. Weakness in the guts of Tuesday’s U.S. inflation report suggests the real inflation scare, at least for central bankers, may be the prospect of softening price pressures, rather than the fears of an acceleration that gripped Wall Street last month. “Procyclical inflation,” which denotes changes in the prices of goods and services that in the past have tended to be more sensitive to labor-market conditions, moderated in February to the lowest level since December 2015. 

Coming Up…

China may report some ugly data as it releases retail sales and industrial production figures. The Lunar New Year distortions usually lead to figures that are even uglier than economists had forecast. Before then, investors will get reports on South Korean employment and Australian consumer sentiment, which may be diverging strongly again from robust business confidence.

What we’ve been reading

This is what caught our eye over the last 24 hours.

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