French Unrest Spreads, Musk A Trillionaire Again, Britain's Jobless Recovery

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0:12 It's Tuesday, the 6th of October. I'm Caroline Hepker in London. Coming up today, French student unrest spreads nationwide as teachers walk out, but fiscal pressures mount. Elon Musk's fortune climbs back to trillionaire status as SpaceX shares rise. Britain's jobless boom. Why UK workers aren't feeling the benefit of an economy that is growing faster than its European peers. Let's start with a roundup of our top stories. Hundreds of French high schools will shut today as teachers' unions join student-led protests.

0:48 Demonstrators are demanding more investment in French schools, including smaller class sizes and building renovations, plus reform of the system that allocates university places. Alice Cohen-Morzadec from the French Students' Union says the government isn't listening.

1:04 We just want to make our demands be heard for once because the government isn't hearing us. So this movement will just amplify and we are even calling on everyone to join us in this movement, even outside of France and all over Europe.

1:19 A poll for French newspaper Le Figaro published last week showed that 62% of French people support the student mobilization. But the unrest comes as investors dump French assets as concerns over a bloated budget deficit and political instability are shown. The government is trying to get parliamentary backing to sharply restrain public spending to pair the fiscal shortfall to 5% of economic output next year. Meanwhile, today, the far-right leader Marine Le Pen will present her budget proposals, including a longer-term plan for savings if elected. Well, the cost of insuring French banks against default has jumped above other major European lenders. Protecting 10 million euros of debt from France's

2:07 Société Générale now costs 103,000 euros per year. That's versus 86,500 euros for insuring the same amount of debt from Germany's Deutsche Bank. The pressure has prompted a warning from France's central bank governor. Emmanuel Moulin has told the Financial Times that the country risks being, quote, strangled by interest rates unless it tackles its public finances. Here is Bridgewater Associates founder Ray Dalio who agrees.

2:38 In Europe and large parts of the United States, you've lived on the borrowing. And then when you reach your borrowing limit, as France has done, then there's a bind because then you cannot continue to add to that.

2:51 Ray Dalio there. As Bloomberg Economics says that soaring borrowing costs will likely deter an ECB rate increase this month. That's despite euro area inflation that is expected to hit 4% by the end of the year. Well, in Germany, Chancellor Friedrich Merz's government risks collapsing as a dispute over tax increases deepens. Bloomberg understands that the measures under discussion could raise more than € 4 billion a year. Negotiators are still divided, though, over taxes on sugary drinks. plastic packaging and private crypto gains.

3:24 Officials say that there's no clear path to passing the full package, putting November's budget approval at risk. Meanwhile, US Treasury Secretary Scott Besant has told a gathering of business leaders that 3% growth can quickly bring down America's debt burden. But economists surveyed by Bloomberg expect little more than 2% growth in 2027 and 2028. The prediction comes after several of Besant's previous economic forecasts proved too optimistic. BMO's head of fixed income and money markets, Earl Davis, sees US 30-year yields reaching 6%.

4:00 The market only has the ability to focus on one thing at a time, whether that be inflation or growth or things that impact interest rates. It's actually focused on the interest rate, 20-year highs, 25-year highs. That tells us that the volatility will increase and be high and see 6% because it's a global phenomenon. It's not just a made-in-US phenomenon, but the focus is on the US now. So that gives us a very high conviction in seeing 6%. Not only that, I believe there's a high probability we see it this month.

4:33 This month, that was Earl Davis there, as the yield on 30-year US Treasuries currently stands at 5.68% and the 10-year yield at 5.32%. That's around levels last seen in 2002. Germany and France are urging the EU to potentially cut China off from the bloc's single market. Bloomberg has seen a letter to European Commission President Ursula von der Leyen which calls for new powers to immediately block an external nation from its market. While the letter doesn't specifically mention China, the EU is exploring ways to rebalance its trade relationship with the country. Leaders meet next week to discuss the issue.

5:14 President Trump has said that fresh terror threats prompted the United States to remove its B-1 bombers from their base here in the UK. His comments to White House reporters contradict his top diplomat, Marco Rubio, though, who described the move as part of a regular rotation. Heather Connolly from the American Enterprise Institute says that the administration is giving conflicting accounts of the withdrawal.

5:37 You had Secretary Rubio say, nothing to see here. We move planes around. You had the vice president say, out of an abundance of caution, you just heard President Trump say there is a threat. So we have the three senior leaders giving us three very different interpretations of what happened.

5:51 But I will say what.

5:52 Concerns me the most, and it is tied into the Middle Eastern bases, we have a problem with base protection.

5:59 That was Heather Connolly, senior fellow at the American Enterprise Institute. Democrat Senator Mark Warner told Bloomberg it's important to protect personnel, but the, quote, hurried exit gives Iran a propaganda win, in his view. Yemen's Saudi-backed government says that its armed forces have recaptured the Red Sea city of Mokka from the Houthis. The apparent breakthrough comes only one day after it announced that it would retake all territory held by the Iran-backed militia. Bloomberg's Stuart Livingston-Wallace has the latest.

6:31 We need to put in some caveats immediately.

6:33 One is we're relying entirely here on the claims being made by the Yemeni government or the internationally recognized government. Secondly, as we know from Russia, Ukraine, you know, front lines are always somewhat muddled and confused. And then the third thing is, can they hold it? Because so far their track record in holding territory has been somewhat patchy. Having said that, you know, if this turns out to be true and something they can hold, that is strategically very important.

7:00 Of course, they have those more northern coastal areas and for many years have been firing on shipping. So it doesn't remove the threat entirely.

7:07 That was our head of Middle East and North Africa coverage, Stuart Livingston-Wallace. Capturing the port city puts the internationally recognised government closer to taking over the vital Babel-Mendeb Strait. In other news, Moonshot AI has closed its final round of private fundraising at a valuation of about $ 50 billion. Bloomberg's Balazs Pen says that the fervour around the Chinese artificial intelligence company suggests a coming IPO.

7:36 It just shows the amount of excitement around this company. And that really sets them up for an IPO here in Hong Kong. Now that looks like they're shooting for the first quarter of next year. They will need regulatory approvals. There's a lot that still needs to be done before that listing can happen. But they're on their way. And that just shows us that the excitement over AI, the fundraising just keeps going on in Hong Kong. And we're in for another big blockbuster year next year.

8:05 Blockbuster year. That was Bloomberg's Balazs Pens there. Moonshot is seen as one of the biggest stars of China's AI scene with its Kimi K3 open source model competing with the likes of OpenAI and Anthropic. And the tech rally has boosted the net wealth of SpaceX and Tesla's CEO Elon Musk. Bloomberg's Ewan Potts has the details.

8:26 Elon Musk is once again a trillionaire, with more than 98% of his wealth tied up in SpaceX and Tesla shares. The decline in their value early this year saw a hefty $ 600 billion wiped from his net worth. But a rally in the shares of both companies this month means that Musk will no longer have to suffer the indignity of.

8:47 Merely being a billionaire.

8:49 In London, I'm Ewan Potts, Bloomberg Radio.

8:51 Okay, there you are. Our top stories for you this morning. Well, thinking about the markets, I mean, there is real push-pull. AI optimism, which is seen, for example, in the Asia session, the Nikkei and Chinese stocks, the Hang Seng up by seven-tenths of 1%. and also a record high close to the Nasdaq yesterday with stock futures for the U.S. also firmly up this morning, a tenth of 1% for the Nasdaq, even in futures. And then the issue of bond yields at multi-decade highs, although we have seen French OATs rally over the last couple of sessions, so yields coming down just a little bit. But really, there is huge pressure and concern around the budgets in France, in Belgium, and in other countries. European countries. Looking elsewhere in the markets

9:39 this hour, the euro also is holding close to that 17-year low against the dollar 1.1211. Oil prices are up and trading above $ 100 a barrel for Brent crude futures, $ 100. 88. And I'll just check in on that 10-year US Treasury yield, which is up a basis point this morning at $ 5.

9:58 32.

9:58 So, those are the markets. Now, in a moment, we're going to bring you more on why UK workers are being left behind, it seems, in Labour's growth revival. But another story has caught our attention this morning. You know, it's a European debt crisis when there is an acronym. This, according to Bloomberg opinion writer Lionel Laurent. who has spotted this new one, FROGS. It stands for French Oversized Government and Social Security. And Lionel points out that it is from the Parisian research firm Rexacode. So, FROGS, reminiscent of pigs, of course. These were the countries during the European debt crisis, Portugal, Ireland, Italy, Greece, and Spain. You've got rising borrowing costs, squeezing indebted And

10:48 France is really at the head of that queue with a budget deficit of more than 5% debt of almost 120% of GDP. And then the election next year, of course, Lionel talks about how the far right... And the far left, neither of them is willing to roll out what he calls the honesty doctrine. Lionel saying that the country's political class has lost its grip on the public finances. Perhaps that's still a point of debate, though. And today, France faces another day of nationwide, possibly violent protests. We've seen that recently as school pupils demand more investment in schools, more money. The unions are calling for strikes, too, and investors have been unloading French bonds with soaring yields. Bloomberg's

11:37 Tiwa Adamayo joins me now to discuss. Tiwa, just firstly, what are we expecting in terms of the protests?

11:44 Well, Carolyn, as you've mentioned, we've been seeing these widespread protests, really, in France over education. They started last month in Paris before sort of unexpectedly gaining steam last week. So, we've seen hundreds of blockades. Some have got particularly violent, including fires and violent clashes with the police. As you mentioned, these protests are over a lack of teachers and investment. So, they're talking about overcrowded classrooms, rundown buildings. They were started by the high school students in the lycées of France and then later spread.

12:13 To the university students.

12:15 But just in terms of some of the confrontations that we've seen, one student had his hand blown off during a confrontation yesterday. Another reportedly struck in the head by a tear gas grenade last week. In the midst of all of this, there is this real political undercurrent. And it does seem like some of the most fundamental political questions in France today are really playing out through these demonstrations.

12:38 So we've already heard the government warning that this unrest is the result of the far left, the France Unbowed Party, that Jean-Luc Mélenchon.

12:48 Melenchon, who's a de facto leader.

12:50 And then we've seen them respond by saying that these protests are the most powerful high school and university student youth movement since 1968 as a major year of unrest in France. And then we have also heard from Marine Le Pen, the leader of the far right, who's criticised But there is also this question of intergenerational unfairness. France has spent years investing in their pensions. And perhaps now this is the result of that. The youth of France perhaps feeling neglected. We have seen this intergenerational unfairness issue be addressed. defining issue across Europe, facing perhaps the same in the UK with the discussion about the triple lock and about young people being able to buy houses. But

13:33 in terms of what we're expecting now, the major union organising.

13:37 This, the Union Syndicale Lycaenne, has.

13:39 called for people to join these protests today, even across Europe, outside of France, and also the teachers' union now also urging its members to join the protests. The prime minister did send a letter over the weekend to his ministers calling on them to make proposals on the issues that have been raised by the students. He did also note that that the initial budget proposal from the government included an increase of 1.2 billion euros.

14:06 Next year for education. So, that's where it stands.

14:08 We're expecting widespread disruption today in terms of those protests.

14:13 Yeah, and that intergenerational clash that you point to, that is especially reminiscent of 1968, when there were huge protests across Europe.

14:23 France.

14:23 And the student you mentioned with the hand blown off, 15 years old, reportedly, so you're very young. Look, what about France's debt and surging yields? That is what investors are focused on, of course. Concern, really, about a sovereign debt crisis with demands for more money to be spent on things like young people. You know, it comes down to government affordability.

14:46 Yeah, well, I mean, it's quite ironic, perhaps, at a time when you're seeing the public cry out for more spending in.

14:52 Terms of public services.

14:53 62%, according to a recent survey, are in favour of these protests for education. But this comes when the government really doesn't seem to be able to afford it. And the commentators are invoking this memory of the European debt crisis. As you mentioned, the frogs The country's risk premium on sovereign bonds at its highest in more than a decade.

15:17 And now with the budget proposals, the government are trying to get the deficit just to 5%. Bear in mind that the Eurozone target is 3%. So still quite far away from that target. But none of this seems to be especially new. And in some facts, people are saying that this really started about two years ago with Macron's perhaps ill-fated decision.

15:40 To call early elections.

15:42 Yeah.

15:42 But you do get the sense that the longer this carries on, the more anxious markets and investors are getting. And of course, the global backdrop doesn't help. We are seeing widespread uncertainty in Europe. Just yesterday, Spain calling snap elections. There are questions about whether or not or how far the ECB could expand.

16:01 Intervene here.

16:02 Certainly, the mutualized debt that we saw during the Eurozone crisis isn't a popular option. So, France seems to be in a real sticky situation here. And certainly, there are parallels being drawn with the UK, for example. A lot of commentators saying that UK debt didn't ever recover, perhaps, from the premiums that were seen during the trust era.

16:24 Could this be a similar situation for France now.

16:27 We have one economist saying France is too big to bail out. What could come next? How could this be resolved? I mean, I'm thinking also about the election next year, what we're expecting from Marine Le Pen today.

16:39 Yeah, so we are due to hear from Marine Le Pen with her version of budget proposals later today. That will reportedly include a longer term plan for 125 billion euros of savings if she's But in terms of the numbers, getting debt under control would require finding the equivalent of five percentage points of GDP that would have to come through less spending, more taxing, not very popular. The far left wants to cancel the country's debt and tax the rich.

17:10 to lessen the pain on ordinary citizens. But there is, of course, this question of whether or not France can recover from the perception of instability that I think will be crucial. We mentioned Britain's guilt not really recovering from the trust debacle. At the moment, there is this uncertainty and anxiety when it comes to France. Will it be able to shake that reputation? I think that's going to be the key question going forward.

17:34 Yeah. Yeah, absolutely. Tiwa, thank you so much for being with us this morning, taking us through everything that is happening in France, and not just the protests, but also the squeeze on the government when it comes to bond markets. That is Bloomberg's Tiwa Adebayo. Thank you. Stay with us. More from Bloomberg Daybreak Hub coming up after this. Well, across Europe, countries are grappling with weak growth and rising unemployment. Yes, in France, also in Finland, in Sweden. Here in the UK, a long period, two years, in fact, in which private sector headcount has been cut. comes even as the economy has actually outpaced other G7 nations. Our UK economy reporter, Irina Angel, has been writing about this and reporting on it. Irina,

18:22 good to speak to you. Is there a disconnect then between growth and job creation in Britain now?

18:30 Well, that's certainly what the numbers suggest, Caroline.

18:32 So the UK economy has grown by about 2.5% since early 2024, and that's nearly twice the pace of Germany, France or Italy. But at the same time, firms have cut around a quarter of a million payroll jobs. And, you know, long-term unemployment is close to a four-year high. Youth unemployment has become one of the biggest national problems.

18:55 And what's striking is that some of the sectors doing most of the heavy lifting on growth, so IT, professional services, manufacturing and retail, well, these sectors have shed almost 120,000 jobs since December alone.

19:09 And those losses have only been partly.

19:11 Offset by hiring and less productive or even shrinking parts of the economy. So at the moment, the UK seems to be finding a way to grow without hiring many more people. And in some parts of the economy, doing more with fewer workers is starting to look like the winning formula, really.

19:27 Yeah.

19:29 And yet we're becoming ever more aware of the youth unemployment crisis that is happening internationally. There is a reliance on business to try to bring more of those young people and expectation maybe from government that businesses should hire those young people, even as they're also trying to cope with higher energy costs.

19:50 And higher taxes.

19:51 Yeah, I mean, and that is a big question. If businesses will respond to the government's call to help do the heavy lifting on youth unemployment and You know, labor is increasingly paying firms to create those first opportunities for young people. And we have seen some really big employers announce major work experience programs for young people, especially for those who are not in education, employment or training or needs, as we call them. But if you zoom out, the overall direction still looks pretty worrying, right? As you mentioned, higher energy costs, higher taxes, AI. Firms are getting better at doing more with fewer people in this uncertain environment.

20:35 And they're improving how they operate. They're getting better at management, using AI to boost productivity. And in some cases, even changing their hiring plans before those productivity gains have even fully materialized. And, you know, the mindset is the real problem here. Many people have told me a lot of businesses still seem to see artificial intelligence and other kind of productivity enhancing tactics mainly as a way to cut costs rather than something that helps them grow, expand output, you know, and ultimately hire more people and create those opportunities.

21:11 Yeah.

21:12 Yeah, anecdotally, I think also in the UK, you can't escape stories of the difficulties of young people trying to get into the world of work and how hard it is. What does it mean, do you think, politically for the Labour Party under a new leader, of course, Andy Burnham, few jobs to show in a way for their efforts?

21:33 They've been in power for just over two years now.

21:36 Yeah, no, that's right.

21:37 And it is a sort of a jobless recovery. So, you know, if it's a jobless recovery, the question then becomes, is it a recovery at all if people don't really feel it, you know, by because pay rises are getting smaller and new jobs are harder to come by. So, you know, even if the economy is growing, voters are not really feeling it anymore. You know, speaking at the Labour conference last week, Prime Minister Andy Burnham promised a new economy where stronger businesses create jobs and spread prosperity more widely. But, you know, that sort of new economy already looks outdated because companies are choosing to navigate this difficult outlook by doing more with fewer people. And of course, there's also a danger that this jobless recovery just becomes stagnation,

22:24 runs out of steam if more and more workers.

22:28 Are pushed to the sidelines.

22:30 So really, the clock is ticking for labor to bring some jobs into this recovery.

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