Business

By Laura Sanicola and Muyu Xu

(Reuters) -Oil rebounded on Thursday after sliding 1% in the previous session as concerns over tight supplies heading into winter eclipsed fears of a global recession.

Brent crude futures rose 50 cents, or 0.6%, to $90.33 per barrel by 0319 GMT, recouping their losses in early Asia trade. U.S. West Texas Intermediate (WTI) crude rose 45 cents to $83.39.

Both benchmarks fell to a near two-week low on Wednesday after the U.S. Federal Reserve raised interest rates by 75 basis points for the third time to tame inflation and signaled that borrowing costs would keep rising this year.

The market had priced in rate hike expectation and the announcement from the Fed did not generate much surprise, said analysts from Haitong Futures.

Russian President Vladimir Putin on Wednesday called up 300,000 reservists to fight in Ukraine and backed a plan to annex parts of the country, which escalated the conflict and intensified the risk of geopolitical runaway, they said.

Meanwhile, some Chinese refineries are considering increasing runs in October, eyeing stronger demand and a potential reversal of Beijing’s fuel export policy, which could boost crude oil demand.

But oil prices remain under selling pressure due to inventory stock builds and a worsening economic outlook, said Citi analysts in a note.

U.S. crude inventories rose by 1.1 million barrels in the week to Sept. 16 to 430.8 million barrels, smaller than analysts’ expectations in a Reuters poll for a 2.2 million-barrel rise.

The soaring dollar also put a lid on oil price gains as it is making crude more expensive for many buyers. The dollar index touched a 20-year high against a basket of other currencies on Wednesday.

Elsewhere, Germany nationalised gas importer Uniper on Wednesday and Britain said it would halve energy bills for businesses in response to a deepening supply crisis that has exposed Europe’s reliance on Russian fuel.

(Reporting by Laura Sanicola and Muyu Xu; Editing by Kenneth Maxwell and Kim Coghill)

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By Lindsay Dunsmuir and Ann Saphir

(Reuters) – The Federal Reserve on Wednesday delivered its third straight 75-basis point interest rate hike in its campaign to drive borrowing costs high enough to bring down 40-year high inflation.

The goal: to get businesses and households to pull back on spending and reduce demand for goods, services and labor, thereby easing upward pressure on prices.

But the process won’t be smooth. Regular Americans have felt the sting of inflation for months, and the Fed’s effort to lower it so far have already made it harder for many consumers to buy things like a house or a car. Other shoes have yet to drop, though, such as a jump in unemployment or even a recession.

Here’s how it could play out:

UNEMPLOYMENT SEEN RISING, INFLATION STILL HIGH

Fed Chair Jerome Powell has said that the rapid and forceful action the central bank is taking will have “unfortunate costs” including a rise in the unemployment rate, currently at a very low 3.7%. Fed policymakers expect it to rise to 4.4% by the end of next year, projections released Wednesday show.

Earlier this month Fed Governor Chris Waller warned the Fed would be comfortable with the unemployment rate increasing to 5% before policymakers start to mull any change in strategy. An increase of that degree – which could translate to more than 2 million jobs lost – has historically been consistent with the economy being in recession. For perspective: in the last three recessions, the jobless rate peaked at roughly 14.7%, 9.5% and 5.5% in 2020, 2009 and 2001, respectively.

None of those recessions, though, were preceded by inflation anywhere near as high as today, a fact that could make a coming downturn more painful.

WAGE GROWTH SLOWS, FEWER JOB OPENINGS

Wages grew at a 5.2% annual rate in August, a strong clip, with the lowest paid workers seeing the biggest rise in their pay packets. But that’s where the good news ends. Policymakers view that pace of wage growth as too strong to be consistent with the Fed getting overall inflation back to its 2% goal, so they are trying to tamp it down. The longer those outsized wage gains continue, they worry, the more likely high inflation becomes embedded in the economy in a self-perpetuating spiral.

One reason wage gains have been so strong is fierce demand for a pool of labor that has only just regained its pre-pandemic size, even as the economy has gotten bigger. The availability of nearly two job openings for every job seeker reflects that, and Fed policymakers hope businesses will respond to interest rate hikes mostly by trimming hiring rather than with outright layoffs. Fewer job openings should translate to slower wage growth, meaning that unless inflation comes down quickly more workers will see their pay packets actually shrink after accounting for the hit from inflation.

Fed policymakers see inflation, now at 6.3% by their preferred measure, falling to 2.8% by the end of next year, projections released on Wednesday show.

SAVINGS RATES WILL RISE, BUT SO WILL RATES ON CONSUMER LOANS

Households will see an increase in the interest rate on their savings accounts, particularly at online institutions. But in general, banks are slow to pass on the Fed’s rate increases to savers and do so at levels typically far below the central bank’s policy rate and, currently, inflation.

Finance companies will also raise their rates on most consumer and auto loans, rates that are generally far above the central bank’s benchmark to begin with.

BUYING HOMES LESS AFFORDABLE, BUT RENTS ALSO KEEP RISING

Of all the economy’s sectors, the housing market is where the Fed’s rate hikes have hit hardest and fastest, with mortgage rates doubling in just over eight months to a current average of 6.25% for a 30-year fixed rate mortgage. Home sales have dropped. But, in part because of a still-acute shortage of homes, prices have only edged down slightly, to $389,500 for the median existing house in August — still up 7.7% compared with just a year earlier. With the rise in rates, monthly mortgage payments on a median-priced existing home have jumped nearly 60% to $1,940 this year. Roughly 17 million fewer households have the income to qualify for a mortgage for a median-priced home than at the end of last year, economists at Oxford Economics estimate.

Rising rental prices are also squeezing incomes, offering little relief at least over the next few months. The rate of increase based on a weighted average of the two main rent indexes climbed to 6.4% in August from one year ago, while the 3 month annualized rate of increase jumped to 8.6% “suggesting that rents are still in the process of accelerating higher,” according to Ryan Wang, U.S. economist at HSBC.

FOOD AND GAS PRICES: NOT MUCH THE FED CAN DO

As much as the Fed raises interest rates to quash inflation, the everyday prices that Americans perhaps care most about — food and gas – are beyond the central bank’s reach, as their cost is determined by global factors largely affecting supply. Gasoline prices, which spiked in the U.S. to more than $5 a gallon in mid June as a result of the fallout from Russia’s invasion of Ukraine, have dropped to roughly $3.70 a gallon, the 11th straight week of declines. Wholesale gasoline prices are expected to keep falling in coming months as U.S. refiners overproduce fuel to try to rebuild low stocks of diesel and heating oil, according to analysts and traders.

But the ongoing war in Ukraine as well as severe droughts in Europe and China, will keep U.S. food prices, already up more than 11% compared to one year ago, elevated at least into early next year. Russia’s announcement earlier on Wednesday that it will send significantly more troops to Ukraine further escalates the conflict, and could jeopardize a Black Sea corridor established under a U.N.-backed deal that had recently allowed maritime grain exports from Ukraine.

(Reporting by Ann Saphir and Lindsay Dunsmuir; Editing by Chizu Nomiyama)

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(Reuters) – Meta Inc is looking to trim its costs by at least 10% within the next few months, the Wall Street Journal reported on Wednesday, citing people familiar with the company’s plans.

The reported figure represents a big jump from the earlier forecast of about 2% to 4% cost cuts that Meta announced in July. ()

To meet its latest target, the Facebook parent has already started nudging out a large number of staffers by reorganizing departments and providing affected employees a limited window to apply for other roles within Meta, the report said.

The idea behind the move is to achieve staffing cuts while forestalling the mass issuance of pink slips, and the reductions are expected to be a prelude to deeper cuts, according to the report.

Meta on Wednesday reiterated its plans to steadily reduce headcount growth over the next year in an emailed response.

The company’s business has taken a hit in recent months as recession fears and competitive pressures hit digital ads sales.

Reuters had reported in June that Meta had cut plans to hire engineers by at least 30% this year as it prepares for a deep economic downturn.

(Reporting by Savyata Mishra in Bengaluru; Editing by Shinjini Ganguli)

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(Reuters) -Citigroup Inc said on Wednesday it was planning to wind down its retail bank in the United Kingdom, aiming to further streamline operations as part of its chief executive’s strategy.

The move would help Citi improve its focus on services to wealthy clients, the bank said, adding that it had asked certain of its retail clients to shift to its private bank.

Winding down its UK retail bank, which comprises just a single branch, would have no material financial impact on the company, the lender added.

After taking up the top job last year, Chief Executive Officer Jane Fraser pledged to simplify Citigroup by exiting non-core businesses, including consumer franchises in 13 markets in Asia, Europe, the Middle East and Africa.

Fraser has been tasked with transforming a business whose share price lagged rivals like JPMorgan Chase & Co and Bank of America during her predecessor Michael Corbat’s eight years in charge.

On the other hand, JPMorgan and Goldman have expanded their operations in the UK in recent years. In May, executives at JPMorgan said its consumer bank Chase had attracted more than half a million customers in Britain.

Goldman also offers savings accounts under its consumer arm Marcus in Britain.

Citi’s latest announcement comes months after the bank said it would exit its Citibanamex consumer banking business in Mexico, ending its 20-year retail presence in the country.

The UK plans were first reported by the Financial Times, which said Citi is not considering selling its UK retail operations.

The bank has begun consultations with its UK retail banking staff, Citi said.

(Reporting by Niket Nishant and Mehnaz Yasmin in Bengaluru; Editing by Maju Samuel and Shailesh Kuber)

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WASHINGTON (Reuters) – The Federal Reserve raised its target interest rate by three-quarters of a percentage point to a range of 3.00%-3.25% on Wednesday and signaled more large increases to come in new projections showing its policy rate rising to 4.40% by the end of this year before topping out at 4.60% in 2023 to battle continued strong inflation.

The U.S. central bank’s quarterly economic projections, meanwhile, showed the economy slowing to a crawl in 2022, with year-end growth at 0.2%, rising to 1.2% in 2023, well below the economy’s potential. The unemployment rate is projected to rise to 3.8% this year and 4.4% in 2023. Inflation is seen slowly returning to the Fed’s 2% target in 2025.

Rate cuts are not foreseen until 2024.

The federal funds rate projected for the end of this year signals total rate hikes of another 1.25 percentage points to come in the Fed’s two remaining policy meetings in 2022, a level that implies another 75-basis-point hike in the offing.

“The committee is strongly committed to returning inflation to its 2% objective,” the Fed said in a statement announcing its third consecutive 75-basis-point hike, which is considerably higher than the quarter-percentage-point increases typical of the Fed.

The Fed “anticipates that ongoing increases in the target range will be appropriate,” the statement from its policymaking Federal Open Market Committee said, repeating language from its previous statement in July.

The updated projections point to an extended Fed battle to quell the highest bout of inflation since the 1980s, and one that potentially pushes the economy at least to the borderline of a recssion.

The Fed said that “recent indicators point to modest growth in spending and production,” but the economy is still seen slowing to a near crawl this year, with year-end growth of just 0.2%.

The rise in the unemployment rate from 3.8% at the end of 2022 to 4.4% at the end of 2023, meanwhile, is above the half-percentage-point rise in unemployment that has been associated with past recessions.

Fed Chair Jerome Powell will hold a news conference at 2:30 p.m. EDT (1830 GMT) to elaborate on the two-day policy meeting.

(Reporting by Howard Schneider; Editing by Paul Simao)

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By Sameer Manekar and Navya Mittal

(Reuters) -Australia’s Link Administration said on Wednesday Britain’s financial regulator may fine the company’s UK unit 50 million pounds ($56.86 million) in addition to potential 306.1 million pounds in redress over its management of a now defunct fund.

The potential fine and redress payment casts doubts over the share registry firm’s nine-month-long buyout talks with Canada’s Dye & Durham (DND), which has already slashed its offer by a fifth from an agreed price to A$1.95 billion ($1.30 billion).

“This has gone from bad to worse for Link. Link’s announcement today makes it clear that it now faces a A$605 million liability,” DND’s chief communications officer, Wojtek Dabrowski, told Reuters in an emailed response.

“Given what was disclosed in Link’s most recent financial statements, it’s not quite clear how they’re going to pay this.”

Link shares fell as much as 5.2% to A$3.26, hitting their lowest since June 16, and trading at a discount of 14.4% to the latest buyout offer of A$3.81 apiece.

The increasing roadblocks for Link-DND buyout underscore the growing problem of execution risks in Australian mergers and acquisitions in a year marked with share market gyrations and hard-line regulatory approach.

UK-based Link Fund Solutions Ltd (LFSL), which managed the LF Woodford Equity Income Fund (WEIF), is being investigated by Britain’s Financial Conduct Authority (FCA) for the fund’s collapse in June 2019.

The FCA said on Wednesday that Link has 14 days to say if it will challenge its draft fine before an independent committee, or resolve the case by agreement and thereby earn a discount.

The FCA said its redress figure does not reflect any amount which may be owed to anyone else, including members of the fund, as a result of potential wrongdoing by other parties.

“FCA-determined redress is based on misconduct rather than losses caused by fluctuations in the market value or price of investments,” the watchdog said.

Link said on Wednesday it had not made any commitment to fund or financially support LFSL, and considered any liabilities related to the probe to be confined to the fund manager. (https://bit.ly/3LuHyvH)

LFSL was the authorised corporate director for the 3.7-billion-pounds WEIF, which closed in October 2019, and whose assets were picked by veteran star manager Neil Woodford.

Woodford was criticised by lawmakers and investors for holding a large number of illiquid assets, making it hard to meet redemption calls after months of underperformance.

($1 = 0.8794 pounds)

($1 = 1.4961 Australian dollars)

(Reporting by Sameer Manekar and Navya Mittal in Bengaluru, additional reporting by Huw Jones in London; Editing by Shailesh Kuber, Subhranshu Sahu and Ana Nicolaci da Costa)

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By Sameer Manekar

(Reuters) – Australia’s Link Administration said on Wednesday Britain’s financial regulator may fine a UK unit 50 million pounds ($56.86 million) in addition to potential 306.1 million pounds in redress over its management of a now defunct fund.

The potential fine and redress payment casts doubts over the share registry firm’s nine-month-long buyout talks with Canada’s Dye & Durham (D&D), which has already slashed its offer by a fifth from an agreed price to A$1.95 billion.

Link shares fell 1.6% to A$3.39 in early deals, a discount of 11% to the latest buyout offer of A$3.81 apiece and about 30% to the previous agreed-upon proposal of A$4.81 per share.

UK-based Link Fund Solutions Ltd (LFSL), which managed the LF Woodford Equity Income Fund (WEIF), is being investigated by Britain’s Financial Conduct Authority (FCA) for the fund’s collapse in June 2019.

LFSL was the authorised corporate director for the 3.7-billion-pounds WEIF, which closed in October 2019, and whose assets were picked by veteran star manager Neil Woodford.

Woodford was criticised by lawmakers and investors for holding a large number of illiquid assets, making it hard to meet redemption calls after months of underperformance.

Link Group said on Wednesday it had not made any commitment to fund or financially support LFSL, and considered any liabilities related to the Woodford matters to be confined to the fund manager.

“LFSL will explore all options, including engaging in settlement discussions with the FCA, challenging any warning notice that may be issued at the regulatory decisions committee and further through the upper tribunal,” it said.

The increasing roadblocks for Link-D&D buyout underscore the growing problem of execution risks in Australian mergers and acquisitions in a year marked with share market gyrations and hard-line regulatory approach.

Last week, private equity firm KKR & Co said it would not improve its already rejected $14.5 billion offer for Ramsay Health Care after the hospital operator posted a hefty profit decline.

($1 = 0.8794 pounds)

($1 = 1.4948 Australian dollars)

(Reporting by Sameer Manekar in Bengaluru; Editing by Shailesh Kuber and Subhranshu Sahu)

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By Cassandra Garrison and Andrea Shalal

MEXICO CITY/WASHINGTON (Reuters) -An outside firm hired to investigate whistleblower allegations found evidence that Inter-American Development Bank President Mauricio Claver-Carone engaged in an intimate relationship with a staffer, three sources briefed on the probe told Reuters.

The report also cited examples of abuse of power by Claver-Carone, including his dismissal of some bank employees that investigators believed were in retaliation for various personal conflicts, said the sources, who spoke on condition of anonymity because the process is still under way.

Claver-Carone said the investigation did not “substantiate the false and anonymous allegations” made by the whistleblower. Claver-Carone has “not yet formally received the report,” but was able to informally review a copy on Tuesday, his spokesperson told Reuters.

“I would welcome the opportunity to officially respond to the investigation’s findings in accordance with Bank rules and international standards,” Claver-Carone said in a statement.

One of the sources, a former senior U.S. official, said it was highly unusual to post such a document on the institution’s website, given the ongoing investigation. “He’s being accused of misusing bank resources, and in defending himself, he is doing just that – misusing bank resources,” the former official said.

Legal firm Davis Polk presented the findings of its investigation to the bank’s directors on Monday. The IDB’s board hired the firm to investigate allegations leveled against Claver-Carone in a whistleblower email at the end of March.

It concluded that Claver-Carone had an intimate relationship with a senior staffer who previously worked with him at the White House under former President Donald Trump, according to the three sources with knowledge of the findings. Reuters has not seen a copy of the report.

A relationship between Claver-Carone and someone he directly managed at the bank would appear to violate the IDB’s ethics code. One of the sources said the report also noted that Claver-Carone had failed to disclose the prior relationship.

The staffer, in written testimony submitted to investigators, denied “all allegations that suggest any violation of the staff code” and said she had not received any written notification of any allegations.

The Washington-based IDB is a development bank that, while far smaller than the International Monetary Fund or World Bank, is a major provider of development funding in Latin America.

The bank’s 14-member board of directors reviewed the report for hours on Monday and met again on Tuesday to consider next steps, the sources said. It will meet again Wednesday with representatives from all 48 member countries.

The United States, the largest shareholder in the bank, was “closely reviewing” the report but would refrain from further comment until the review was complete, a spokesperson for the U.S. Treasury Department said.

The board had offered to share the investigation’s findings with Claver-Carone before they were presented on Monday, but only under certain conditions, including that no retaliatory action be taken against participants in the investigation. Claver-Carone declined, one source said.

A letter to the bank’s law firm from Claver-Carone’s attorneys, seen by Reuters, said the terms of the offer were unacceptable, and that Claver-Carone had repeatedly been denied the opportunity to know the allegations against him and speak in his own defense.

(Reporting by Cassandra Garrison in Mexico City and Andrea Shalal in Washington; Editing by Rosalba O’Brien and Stephen Coates)

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By Julia Payne and Dmitry Zhdannikov

LONDON (Reuters) – Europe’s problems in sourcing oil and gas this winter after a dispute with Russia may be exacerbated by a new crisis in the market where prices are already red-hot: a liquidity crunch that could send them spiralling higher still.

But European governments have only belatedly rallied to offer financial support to power providers on the brink of collapse, in an effort to ease pressure on a market whose smooth operation is vital to keep people warm.

“We have a dysfunctional futures market, which then creates problems for the physical market and leads to higher prices, higher inflation,” a senior trading source told Reuters.

The problem first came to light in March when an association of top traders, utilities, oil majors and bankers sent a letter to regulators calling for contingency plans.

This was triggered by market players rushing to cover their financial exposure to soaring gas prices through derivatives, hedging against future price spikes in the physical market, where a product is delivered, by taking a ‘short’ position.

Market players typically borrow to build short positions in the futures market, with 85-90% coming from banks. Some 10-15% of the value of the short, known as minimum margin, is covered by the traders’ own funds and deposited with a broker’s account.

But if funds in the account fall below the minimum margin requirement, in this case 10-15%, it triggers a ‘margin call’.

As prices for power, gas and coal have risen over the past year, so have the price of shorts, with the resulting margin calls forcing oil and gas majors, trading firms and power utilities to tie up more capital.

Some, particularly smaller firms, have been hurt so badly they have been forced to exit trading altogether as energy prices soared after Russia’s invasion of Ukraine in February, which made a general global shortage worse.

Any such drop in the number of players reduces market liquidity, which can in turn lead to even more volatility and sharper spikes in prices that can hurt even major players.

Since late August, European Union governments have stepped in to help utilities such as Germany’s Uniper.

However, with winter price spikes lying ahead, there is no indication of whether or how quickly governments and the EU can back banks or other utilities that need to hedge their trades.

Exchanges, clearing houses and brokers have raised initial margin requirements to 100%-150% of contract value from 10-15%, senior bankers and traders said, making hedging too costly for many.

The ICE exchange is, for example, charging margin rates of up to 79% on Dutch TTF gas futures. https://www.theice.com/products/27996665/Dutch-TTF-Gas-Futures/margin-rates

Although market participants say that fast disappearing liquidity could severely reduce trading in fuels such as oil, gas and coal and lead to supply disruptions and bankruptcies, regulators still say the risk is small.

Norwegian state-owned firm Equinor, Europe’s top gas trader, said this month that European energy companies, excluding in Britain, need at least 1.5 trillion euros ($1.5 trillion) to cover the cost of exposure to soaring gas prices. [1N30D0XO]

That compares with the $1.3 trillion value of U.S. subprime mortgages in 2007, which triggered a global financial meltdown.

However, one European Central Bank (ECB) policymaker told Reuters that worst case scenario losses would amount to 25-30 billion euros ($25-30 billion), adding the risk lay with speculators rather than the actual market.

‘NEED TO HEDGE’

Some traders and banks have nevertheless asked regulators such as the ECB and the Bank of England (BoE) to provide guarantees or credit insurance to brokers and clearing houses to lower initial margining levels to pre-crisis times.

Doing this, sources familiar with talks said, would help bring participants back into the market and increase liquidity.

The ECB and BoE have met several big trading houses and banks since April, four trading, regulatory and banking sources said, but no concrete measures have resulted from the consultations, which have not previously been reported.

“It’s too big a single point of risk for a bank. The banks have hit or are close to hitting their liquidity risk and counterparty risk levels,” a senior banking source involved in commodities finance said.

Banks have a certain level of capital they can tie up to a particular industry or a particular player and the price spikes and a reduction of players are currently testing those levels.

The ECB has repeatedly said it did not see systemic risk that could destabilise the banking sector. The ECB declined to offer fresh comment.

ECB President Christine Lagarde said this month she would support fiscal measures to provide liquidity to solvent energy market participants, including utility firms, while the ECB stood ready to provide liquidity to banks if needed.

Britain’s Treasury and Bank of England, meanwhile, announced a 40 billion pound ($46 billion) financing scheme this month for “extraordinary liquidity requirements” and short term support to wholesale energy firms.

A Treasury spokesman said the measures are being taken at the appropriate moment after watching the market for some time and in line with European peers.

Yet the markets for energy and commodities remain opaque, with physical trades hedged with financial instruments depending on internal rules set by the various companies involved.

And since no regulator or exchange maintains a central register for trades it is impossible to see the full picture, sources at several large commodities houses told Reuters.

For some, however, the signals are clear to see.

“Open interest and volumes have come down significantly as a result of what is happening on the margining front,” Saad Rahim, chief economist at Trafigura, told a conference last week. 

“It will ultimately have an impact on the physical volumes that are being traded because physical traders need to hedge.”

(Reporting by Dmitry Zhdannikov and Julia Payne; Additional reporting by Francesco Canepa in Frankfurt; Editing by Alexander Smith)

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By Josh Horwitz

SHANGHAI (Reuters) – A top European industry group warned on Wednesday that firms were losing confidence in China and that its standing as an investment destination was being eroded, citing its “inflexible and inconsistently implemented” COVID policy as a key factor.

The European Chamber of Commerce published the warnings in a paper it said had input from 1,800 member companies, which also contained 967 recommendations for China, the European Union and European companies related to doing business in the country.

The report, which touched on issues from Taiwan to trade, said, for example, that China should refrain from “erratic policy shifts”, deepen cooperation with the European Union and increase international flights.

The European Union should proactively engage with China and reject calls for disengagement, it added.

A “stark contrast” has emerged between China and the rest of the world over the past year, as other countries remain committed to globalisation while China continues to turn inward, the chamber’s president, Joerg Wuttke, told a media briefing.

“The world lives with herd immunity, and China waits until the world gets rid of Omicron, which is of course unlikely,” he said, referring to China’s rigid zero-COVID stance, which has led to frequent lockdowns and kept borders mostly shut to international travel.

China says its policy is needed to prevent its health system from being overwhelmed as well as an unacceptable loss of life.

Besides COVID, the chamber said stalled reforms of China’s state-owned enterprises, an exodus of European nationals from China coupled with travel restrictions for Chinese staff to go abroad as well as increased politicisation of business were also harming China’s attractiveness.

The report said record numbers of businesses looked to shift current or planned investments to other markets.

Last month, a U.S. business lobby said China’s strict COVID control measures had overtaken sour U.S.-China relations as the top concern of U.S. companies in the country.

China is one of the few countries still requiring travellers to quarantine on arrival, and Wuttke said the chamber remained hopeful that restrictions could loosen after the ruling Communist Party’s five-yearly congress, which starts Oct. 16.

While Xi Jinping is expected to secure a historic third leadership term, it is not yet clear who will join him on the Politburo Standing Committee and who will replace Premier Li Keqiang, who is set to retire in March from his role whose main remit is managing the world’s second-largest economy.

Wuttke said that Vice Premier Liu He, who is expected to retire from his current position, always stood for reform and “would be hard to replace”.

“We have to see what the line-up is in the economic decision-making, and that might give us some indications of where this country is heading,” he said.

(Reporting by Josh Horwitz; Editing by Brenda Goh and Alison Williams)

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