France Cracks Down, Musk's $40B Chip Deal, Lula's Shock Brazil Win

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0:09 This is the Bloomberg Daybreak Europe podcast. Good morning.

0:12 It's Monday, the 26th of October. I'm Caroline Hepka in London. Coming up today, police deter violence after hundreds of thousands take to the streets in France, but the government has no clear answer to the protesters' demands. Elon Musk says that he secured financing for his AI ambitions, even as he warns that debt markets are shutting to data centres.

0:36 And Brazil's president pulls off a surprise election win, putting markets on edge. Let's start with a roundup of our top stories. France avoided a repeat of large-scale violence over the weekend, but the anger driving the protests shows little sign of abating. About 110,000 people took part in mostly peaceful demonstrations in Paris on Saturday, with another 300,000 around the country, according to the Interior Ministry. The government deployed 70,000 security officials, including elite anti-terror forces, to keep the peace.

1:11 Ahead of the presidential election in April, far-right politician Marine Le Pen says that France needs to bring back order.

1:20 Take from the past but without nostalgia which anesthetizes which paralyzes which calls to go backwards we are not one of those who say it was better beforehand we say it was good before and it will be better tomorrow.

1:36 National rally leader Marine Le Pen, their Vare translator, addressing her supporters. Both the far-right and far-left candidate Jean-Luc Mélenchon have received a boost from the unrest in the latest polling ahead of various centrist competitors. But the calls for more spending on services come as France is under fiscal pressure and with presidential elections on the horizon. Well, the ongoing turmoil in France has also put a spotlight on the race to be the next head of the European Central Bank. France's fiscal woes mean that Christine Lagarde's successor may have to take on the bond vigilantes. The central bank sets interest rates later this week, along with the Fed and the Bank of Japan. Markets expect rate setters

2:19 worldwide to turn more hawkish as energy prices and the AI boom feed into inflation. Brazil's President Luiz Inácio Lula da Silva has come from behind to win a record fourth term. The Electoral Court has declared Lula the winner with 51.8% of the vote ahead of Flávio Bolsonaro. After a bitter campaign, Lula told his supporters he will regulate foreign interference.

2:51 I would like to thank society in general. In this election, we had to overcome foreign interference, mainly through digital platforms, and we will have to regulate them. Crimes in the digital realm must be treated in the same way as those in real life. We cannot have giant foreign companies that don't pay taxes in this country and that try to interfere with our electoral results.

3:11 It's a surprise victory for Lula, who is speaking there via a translator, who he had come in second in the first round of voting. But his rival, Flavio Bolsonaro, son of the former President Jair Bolsonaro, is calling for the election to be annulled. He says that a Supreme Court decision to extend voting hours renders it void. Market watchers fear a major sell-off is brewing. Bloomberg's Felipe Pacheco explains why.

3:39 People, investors were betting that there would be more austerity under the government of Flávio Bolsonaro, even though he did not detail how he would get there.

3:49 What we've seen over.

3:50 The past three weeks is that Lula just announced a bunch of measures that we're seeing as actually increasing Brazil's debt burden. There has been a lot of discussion that now Brazil is starting from a point when it comes to sovereign debt that is actually worse than what we saw a month ago. And assets should just reflect that.

4:10 Bloomberg's Brazil bureau chief Felipe Pacheco in Sao Paulo there. Trading desks in Sao Paulo tell Bloomberg that they expect heavy selling today that may trigger circuit breakers. Serbia's longtime leader, Aleksandar Vucic, has conceded defeat after a snap election. The strongman says that the student-led opposition movement has won a majority in parliament. It is an astonishing fall from power for Vucic, who has dominated Serbia's politics for a decade.

4:40 He is the second longtime leader to lose power in Eastern Europe this year after his ally Viktor Orban in Hungary. The grassroots movement replacing Vucic, called Student List, doesn't have a single leader and is yet to announce its candidate for prime minister. Venezuelan opposition leader Maria Corina Machado is in Caracas after a days-long journey raising the issue of Venezuela's return to democracy. The 2025 Nobel Peace Prize winner arrived to crowds after nearly a.

5:13 Year in exile.

5:22 So, the sound there of Machado's supporters. Now, her arrival raises questions about Venezuela's electoral timeline after U.S. forces captured authoritarian ruler Nicolás Maduro in January. Both Machado and the country's acting president, Darcy Rodríguez, could take part in talks brokered by the Trump administration. Elon Musk says that SpaceX has closed a $ 40 billion debt deal for AI chips, though Bloomberg understands that talks over pricing are ongoing. News of a potential deal involving NVIDIA's GPUs comes amid mounting scrutiny of AI debt markets. Big tech's spending on the technology will be scrutinized with earnings from Microsoft, Alphabet and Amazon this week. Drew Mattis is Chief Market Strategist at

6:12 MetLife Investment Management.

6:15 Artificial intelligence is driving the equity market. Artificial intelligence is driving the CapEx spend. The CapEx spend and the equity market wealth gains means the consumer spending money. But when you kind of like pull back all the parts of the onion, what you're getting back to is this belief in AI is driving the entire economic outlook. And I think, you know, that kind of macroeconomic concentration is actually probably even more disturbing than kind of the market concentration that we're seeing in the equity space.

6:44 That was Drew Mattis of MetLife Investment Management speaking to Bloomberg's This Weekend. To the UK now, where businesses are hopeful that Chancellor John Healey will cut levies from their electricity bills in this week's budget. Healey has promised to give companies breathing space by tackling high energy costs. Another boon for business could come in the form of improved relations with the European Union, including talks of a future return to free movement with the bloc. Over the weekend, the Housing Secretary, Angela Rayner, backed the Prime Minister's calls on for an honest discussion on the issue.

7:22 It's what is the best deal for Britain and therefore that's what he's asking the public to look at. How can we make things better? We're already seeing billions more in our economy because of the changes we've made to help business and to help bring down bills by having a close relationship with one of our biggest trading partners.

7:41 Angela Rayner there, as Prime Minister Andy Burnham said that he is open to re-adopting the EU's free movement rules and wants a, quote, factual and evidence-based debate on the matter. Those are our top stories for you today. Thinking about the markets, huge week for corporate earnings, for central bank rate decisions. The UK budget also coming and euro area growth and inflation data. There's German EFO data out today. So, lots and lots to think about. OAT, Bund, futures spiking.

8:13 The euro this morning is strengthening against the U.S. dollar about a tenth of 1%. France avoided a Moody's downgrade on Friday. The weekend seemed to pass off largely in a peaceful manner. Stock futures for Europe are also up four-tenths of 1% on the U.S.

8:29 Stock.

8:29 Swifty futures, Nasdaq futures and U.S. futures largely in the green also this morning. This, as we see in the Asia session, it was a fairly mixed situation.

8:40 Session.

8:41 The COSPI index down by 1.3% this morning. All prices, Brent crude down 1.8%, but still trading above $ 114 a barrel. And we have seen a big pop at the start of trading for European natural gas futures, the highest since 2022. So, those are the markets and all we're thinking about. In a moment, though, we are going to talk a little bit more about The latest on the protests in France and also the fallout from Brazil's surprise re-election of Lula.

9:10 Before that, though, something else got my attention this morning. In the age of AI, books about history and current affairs are losing readers. Self-help books have cratered, apparently, in terms of sales. But the celebrity memoir is king, offering authenticity and sort of access. Now, last year, according to one editor at Simon & Schuster, only seven of the top 25 bestselling hardcovers were nonfiction compared to 19 a decade earlier. And Bloomberg's Alice Robb has been writing about the book industry and all of these changing trends. She highlights Sylvester Stallone's memoir, which is called The Steps, in case you're running out to read it. It has topped the New York Times bestseller list. And so she uses

9:55 this as a launching off point, really, to talk about all of the other titles that are coming this autumn. from May Musk, from Dustin Hoffman, from Alice Cooper or Karl MacLachlan.

10:06 Yes, they've all got memoirs out. The industry....

10:11 And some people in the industry think that basically romance and thrillers, people and readers are eventually just going to accept that they are AI generated, that that is coming. But it's the celebrity book that sort of stands taller. even in a world where reading appears to be increasingly irrelevant or fewer people are doing it on a regular basis.

10:34 And also the book deals for writers who might have made a living from it, think journalists, that those are sort of disappearing so there are lots more ghost writers out there and even that whole idea of people writing with a ghost writer it's sort of no longer a kind of hidden thing is it it's that uh those those writers actually get the credit also anyway lovely little story on the world of books and the different deals that there are in the books industry from blue bags alex rob i'll put a link to it in our podcast show notes Right, let's get to France. It may have avoided a repeat of the looting and riots, thanks to a heavy security presence on the streets this weekend, and it swerved a downgrade by moodies on Friday, but

11:17 it remains caught between the demands of the protesters and deteriorating public finances. Bloomberg's Managing Editor for European Economy and Government, Ben Sills, joins us. Ben, good to speak to you. French Prime Minister Sébastien Lecornu is meant to be meeting with student representatives today.

11:33 Is this protest movement.

11:34 gathering pace and how can the government respond?

11:39 I think the protest movement seems to have settled into a kind of like, I think they've reached cruising velocity.

11:44 They've got a whole.

11:45 Series of additional demonstrations planned for the weekends ahead and the relative calm of this weekend's, this past weekend's demonstrations was only due to an absolutely massive police and military presence on the streets. In terms of the response, it's extremely difficult for the government because the students are asking for more spending on schools and the markets are asking for austerity and reductions to the government deficit and the borrowing costs are increasing. So, more and more of the state revenue is going towards servicing the debt. So, it's extremely difficult to see what the way out is.

12:26 The ECB meets soon.

12:29 France's fiscal woes are surely on their radar.

12:33 Yeah, exactly. I mean, everybody in the in the kind of economic policymaking circles in Europe is kind of thinking about that nightmare scenario of a potential French bailout. whether that would be, I mean, in the first instance, that would be some kind of intervention by the ECB in all likelihood. But that's going to be with a new president at the head of the ECB. Lagarde is due to step down at some point in the next few months.

13:03 And so the question of who is going to take over for her really comes down to the question of who do you want at the controls in that scenario.

13:11 Yeah, absolutely.

13:13 This question of the so-called transmission protection instrument, the TPI, could that potentially be in play? Not at the moment, but let's see. Ben Sills, thank you so much for being with me, Managing Editor for European Economy and Government there. It wasn't just, of course, France that saw protests over the cost of living issue, over dissatisfaction. There were also protests in Barcelona and across Italy. And at the moment, it looks like the incumbent French government has has blamed the far left for some of the protests, including Jean-Luc Mélenchon, whilst the far right leader Marine Le Pen has been using it as a way to gather her supporters and to say that she would be tougher in terms of

13:56 cracking down on protests. So that in the presidential election, which comes, of course, in April next year in France. Stay with us. More from Bloomberg Daybreak Europe coming up after this. Well, now to Brazil, where President Luiz Inácio Lula da Silva has won a runoff election against Flávia Bolsonaro in a surprise and contested comeback for the 80-year-old left-wing leader. Fabiola de Moura is editor for Bloomberg's Daybreak Brazil newsletter and Latin America editor and joins us now.

14:33 Good to speak to you, Fabiola. In terms of Lula winning, how did he do it? And how is he likely to govern when it comes to his fourth term?

14:47 It is a fourth term in office.

14:49 Yes, it was a 52 to 48 percent win. And for Lula, it's going to be a tough government in a deeply polarized country. But for Latin America's most veteran politician, he already proved that he can navigate difficult terrain and he won't want to squander his last shot. This unprecedented fourth term in Brazil's history. Now, on the other hand, it was already expected that Flávio Bolsonaro would cry full if he lost, as other right-wing leaders have done. including his father, who lost to Lula in 2022 and later plotted a coup.

15:34 Yeah.

15:34 What sort of campaign then did, you know, the son, did Flavio Bolsonaro run? And could his challenge, do you think, to the election result actually succeed? It looks like it has been widely accepted now.

15:50 Yes.

15:51 Brazil's election system is very sound and it's fraud proof.

15:57 It's all electronic.

16:00 But what happened, it was a campaign full of emotion. So Flávio came in first in the first round of voting. And Lula's turnaround was very much based on social media. The 80-year-old politician didn't have a mobile phone until, you know, a few weeks ago. And all his supporters were mobilized through WhatsApp and other kinds of apps. And this was a big chunk of Lula's recovery.

16:36 On the other hand, there were.

16:38 You know, some accusations of meta meddling into the election and not giving equal treatment to both candidates. Even the UN issued a warning that Lula was being harmed by Meta's different handling of the different candidates. So Lula also talked about it. He said he will try to regulate better social media in his fourth term. And for Flavio, it is a big loss because he was obviously also looking forward for taking his father out of jail. He did talk about he made some campaign promises that were very vague, but markets were betting on him more than on Lula to have more of a fiscal discipline. And now we'll see. Now we'll see what the new government will be able to do. But I don't think, you know,

17:41 this contest by Flavio will go too far.

17:48 Okay, yeah, the challenge that he's making to the election result. Yeah, I think you've explained very well, you know, the idea that this is a deeply divided country, something that we're seeing in many more countries, you know, economically, the left and the right have very opposing views. The markets aren't yet open in Brazil, but there are indications of the investor response because they were really expecting Bolsonaro to win.

18:14 So, what might happen in markets?

18:18 Yes. Markets don't like Lula as much as democracy likes him, you know. So traders are bracing for steep losses across Brazilian assets. especially because, like we mentioned before, Bolsonaro was the favorite. Desks across São Paulo said they expect the selling to be so intense on Monday morning and the decline so severe that circuit breakers may be triggered. And a sign of it is that an ETF tracking Brazilian equities in Japan... already tumbled as much as 16%, the most intraday since 2020. So, we are bracing for a market's reckoning over this, you know, unexpected victory by Lula.

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