Saudi Airport Carnage, Europe Assassin Plot Arrest, France Contagion Risk

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0:12 It's Monday, the 12th of October. I'm Caroline Hepke in London. Coming up today, a fourth Houthi strike hits Saudi Arabia's main airport in a matter of days as the risk of a wider war looms. An assassination threat in the heart of Europe. A man is detained over an alleged plot to kill Polish Prime Minister Donald Tusk. Plus, as France faces a fiscal crisis, the country's bonds turmoil raises the specter of contagion across the Eurozone. Let's start with a roundup of our top stories. Saudi Arabia's main airport has come under Houthi attack for the fourth time in a week, raising the risk of a wider escalation. Authorities say that strikes over the weekend killed at least 13 people and wounded 320 others. The attacks come as Saudi

1:02 fighter jets back a counter-offensive against the Houthis in Yemen. After the first airport attack this weekend, President Trump said that the United States may join strikes against the group. Former White House Middle East coordinator Brett McGurk spoke to Bloomberg after that first attack.

1:20 The attack last night is very emblematic, a very advanced, sophisticated ballistic missile, very accurate, targeting a commercial airport and now a number of civilian casualties. It's an act of terrorism. I think there has to be a response. But unfortunately, you know, this is who these guys are. And it gets to a broader question. And for any president, you have to deal with this. How do you deal with gathering threats?

1:44 Brett McGurk speaking there, the strikes have disrupted travel and prompted fresh warnings from the UK and the US. BP and Shell executives have also pulled out of a major energy event, but Saudi authorities insist that the World Petroleum Congress will go ahead. President Trump says that Russia and Ukraine have agreed to an energy ceasefire effective immediately. Ukraine's Zelensky says that he is awaiting details from the U.S., but Ukraine supports the ceasefire and it is important that Russia support it as well. He was speaking to ABC News ahead of Trump's announcement.

2:20 We are asking President Trump give them signal not attack energy infrastructure of Ukraine.

2:27 It's fair deal.

2:29 It's not the best deal.

2:30 The best deal not to have a war, to stop Putin.

2:33 But the first step is ceasefire.

2:38 President Zelensky speaking to ABC News. The two leaders are on a collision course as Trump increasingly views Kyiv's war through the lens of energy prices in the United States ahead of midterm elections. It comes as Ukraine heads into its fifth winter of war, a senior NATO official saying that Russia suffered more than 50,000 casualties last month. A man accused of plotting to assassinate Polish Prime Minister Donald Tusk has been detained. Poland's interior minister said that the suspect, a man in his 60s from Lower Silesia, had been in contact with extremist groups. He added that it was too soon to say if there was a foreign angle to the case. However, it follows an uptick in Russian hybrid attacks against Europe. The head of NATO's military operations

3:28 told Bloomberg that those attacks... should be attributed where necessary.

3:33 How nations respond is ultimately a sovereign decision for them. What I can tell you is there's always consultations going on in the background. I am talking to the chiefs of defense. Leaders are talking amongst each other. Ministers are talking amongst each other. And that is an important conversation.

3:48 And you saw it recently with the Leipzig incident where there was a ton of support from across the alliance. when the Germans came forward and attributed that event. So I think that's an appropriate model. I'm certainly not afraid to attribute it. If a nation wants me to, I'm happy to talk about it as.

4:04 I just did.

4:05 That was General Alexis Grinkovich speaking there to Bloomberg in Warsaw. China is moving to stave off a wider EU trade war with an automotive deal in a bid to avoid harsher restrictions. According to a document seen by Bloomberg, the EU will cap the import of Chinese hybrid vehicles. at 350,000 cars per year and increased that allowance by 6% annually starting on the 1st of December. Bloomberg's Min Min Lo has the details of the deal. She says it's substantial.

4:37 It is quite significant because 350,000 is about half of what Chinese exports of hybrid to the EU would be this year. We're on track to see close to 800,000 hybrid cars being exported to the EU. So it's a significant cut.

4:54 That was our reporter, Min Min Lo. The agreement comes after talks between China and the EU on Friday ended with a 16-point consensus spanning trade and investment. European leaders will meet on Thursday to decide whether to adopt a more forceful response to the surge in Chinese exports. Germany and France last week called for stronger action, including an instrument that could cut off China from the bloc's massive single market. OK, let's think about AI today. Anthropic says that one of its AI models went rogue and submitted a fake tip in a murder investigation. The clawed model told police, I may have information regarding this case and claimed that it recalled seeing someone matching the description. But

5:41 Anthropic says that the account was entirely fabricated. Villanova University computer science assistant professor Venkat Amagapuri says that he considers it a high-risk event.

5:53 The AI model was actively submitting information to a different website on behalf of the user.

5:59 So that is what I would classify as a high-risk action.

6:03 Computer science assistant Professor Venkat Margapuri there. Anthropic says that it briefed the White House on the cases, which also involved the model attempting to submit 20 fake visa applications. Trump administration officials said on Friday that they were now requiring the AI companies notify affected parties. The global sell-off in bonds may mean fewer interest rate hikes are coming from global central banks. Bloomberg data shows multi-year highs in bond yields have pushed traders to pare back rate hike expectations across eight major economies. But the Institute of International Finance President Tim Adams says that the strong growth picture means higher rates are still needed.

6:46 I think the economy is roaring.

6:48 It's roaring.

6:48 The consumer is strong. Household balance sheets are strong. Corporate earnings are strong.

6:52 And I think it's going to take some effort and some time to bring inflation down to the 2% target.

6:58 That the Fed and other central banks have stated is their objective.

7:02 Adams was joined by IMF head Kristalina Georgieva, who urged central banks to take a prudently hawkish bias with the IMF summit taking place in Bangkok this week. Lastly, the government here in the UK needs to find an extra £ 35 billion to meet its pending ambitions. The Institute for Fiscal Studies says that inflation means the government will have to raise taxes if it wants to meet its own spending plans. Bloomberg's James Walcock has more.

7:31 Chancellor John Healey heads to the IMF summit in Bangkok this week. He wants to talk up Britain's resilience to global economic shocks. But the IFS says the opposite. They say rising energy prices and interest rates mean the government faces tough choices. With the budget in two weeks' time, Bloomberg reports the Chancellor is planning a set of short-term giveaways, hoping the Iran war will end soon. But the tight fiscal picture suggests Healey will either need to cut spending or raise taxes to afford that. In London, James Wilcock, Bloomberg Radio.

8:05 Those are our top stories. In the markets, stock futures looking positive for the European market open as we head into earnings season. Banks will be in focus in particular this week.

8:14 U.S.

8:14 Stocks 50 futures are up 0.6% of 1%. NASDAQ futures up by half of 1%. U.S. Treasury market is closed today, but cash equities are trading. In terms of other markets that we're looking at, the KOSPI slumping 2.9%. this morning. And if we think about bond markets, so, we mentioned in our top stories the idea that there may be fewer rate hikes in the major economies of the world.

8:39 Traders are now pricing in 539 basis points of rate hikes, and that is down from 717 basis points that was priced in September. So, despite the kind of inflationary pressures, we've already moved significantly towards tightening of borrowing conditions around the world. Brent crude futures this morning are down 1.2%, $ 103. 47.

9:01 That is a look at where we are in the markets. So, in a moment, we're going to be talking about France and we will bring you the latest on the attacks on Riyadh Airport and just how serious it is becoming in the Middle East. In terms of other stories, though, that have caught my attention. So this Monday morning, delicate gelato spoons, ashtrays, vintage mirrors, even a sconce unscrewed from the wall. This is the wacky and hefty list. Of all the things that people have stolen from restaurants, according to Bloomberg's Kate Crader, who's been writing about this, what people pilfer from restaurants. Why do people take so much stuff from restaurants? Mementos, an unusual item, the thrill of doing something illicit. Some of the things that restaurants and

9:51 restaurateurs say have been stolen are really quite enormous. Things like a custom framed vintage swimsuit on the wall of Lamica restaurants in Manhattan. Golden Lucky Cat chopstick holders from Gordon Ramsay's Mayfair restaurant. Ashtrays from Claridge's. So Kate has the list of all of these things. But she also details just how expensive it's becoming and the cost of replacing these items. But also that pilfering from restaurants is getting bigger. And she says maybe that's because meals themselves are becoming more expensive. And so people sort of feel more entitled. Anyway, I thought it was a very interesting piece that Kate has written about. And I'm going to put a link to it in our podcast show notes

10:36 for you. One person has been killed as Saudi Arabia's main airport was hit by Iran-backed Houthi rebels. This comes a day after a strike killed 12 people. The attacks threaten to widen the war in the Middle East and put fresh pressure on the region's biggest economy ahead of a string of major events. Joining us now is Ona Ant, our managing editor for the Middle East and North Africa. Ona, there have been a number of these attacks on Riyadh's airport just this week. What can you tell us about what is happening?

11:11 But these attacks on the King Khalid International Airport in Riyadh, the Saudi capital, mark some of the deadliest incidents in the kingdom since the Iran war began in February. On Saturday alone, at least 12 people were killed when projectiles hit. struck the King Khalid passenger terminal. Over 300 people were wounded.

11:32 There have been other attacks, both actual attacks and intercepted ones, on airports, including in King Khalid and another one in Daman, in the eastern province of Saudi Arabia, were reported over the weekend. And we know that a Saudi-led coalition operating in Yemen against Iran-backed Houthi militants retaliated and struck the the main airport in the Yemeni capital of Sana'a, which is under control of Houthis. There is now a risk that this back and forth between Houthis and Saudis might turn into a wider conflict and pull in other parties, possibly the U.S., where President Trump said he is considering whether or not he should help Saudis in their fight against Houthi militants.

12:17 What is the thinking then about the idea of whether this becomes a wider war, do you think?

12:22 First of all, Houthis are part of the so-called Axis of Resistance, which is a group of militant groups led by Iran. They share in their ideology and their resistance against what they call ISIS. You know, broadly the West or the Western powers, although they do not really take orders from Tehran, Houthis do coordinate some of their actions with the Islamic Republic.

12:48 So the fact that this new.

12:52 flare-up in their attacks against Saudi Arabia came at a particular point in time shows a possibility that this may be in coordination with Iran, and therefore it reinforces the idea that this flare-up in tensions with Saudi Arabia could be a precursor to something wider, something more intense coming up in the region, in light of the ongoing war between the U.S. and Iran.

13:18 What does it mean for Saudi Arabia's economy? It's meant to be hosting a lot of international events, and yet there are travel advisories now from a number of countries.

13:28 Yeah, well, King Khaled, the main airport in Saudi Arabia, is practically, for practical purposes, it is closed. No flights coming in and out, or were coming in and out of the airport as of last night. And yes, this comes at a particularly sensitive time for Saudi Arabia. There's a World Patrolling Congress going on in Riyadh at the moment.

13:47 It hasn't been cancelled yet. But probably more importantly, there is another event, Future Investment Initiative, FII, later this month. And that is where Saudi Arabia basically tracks top investment bankers from around the world, also giants, to Riyadh. And that's the main venue where Saudi authorities sort of pitch.

14:07 Saudi Arabia as an investment opportunity to the rest of the world. And whether or not that goes ahead is going to be extremely important. The latest guidance we got from FIA organizers overnight was.

14:16 That it will go ahead.

14:18 But if these attacks continue and the airport remains practically shut, obviously that raises questions about whether or not this event can actually be held. But it's not something that we can say is going to happen or not with a great degree of certainty before we see whether or not these attacks continue at the current pace that we're seeing now.

14:41 Yeah, indeed. 12 people killed and more than 300 injured in the attacks on Riyadh Airport over the weekend. Honor, thank you for giving us further details on what's happening. Honor Ant is our managing editor for the Middle East and North Africa. Stay with us. More from Bloomberg Daybreak Europe coming up after this. Now to France, which has seen hundreds of thousands of young French people taking part in nationwide protests, violence flowing up and bonds suffering a market rout. Alan Katz is our Paris bureau chief and joins us now. Good to speak to you, Alan. It seems that France is in a bind, isn't it? Young protesters, we learn, want 10 billion euros to fix schools. But France's indebtedness and kind of budget problems are quite clear.

15:30 Can you lay out some of the concerns now? We are a few days into what seems to be something of a crisis.

15:38 So, it is. The 10 billion.

15:41 euro figure is sort of plucked out of the air.

15:44 I mean, it is what at least one group called for.

15:47 But the fundamental issue is that students, particularly outside of city centers, students in poorer regions, for example, the Paris suburbs, feel like their buildings have been neglected, that they study in bad.

16:04 Conditions, that their teachers are often absent, and that when they are absent, they're The national education system is slow to replace them with substitute teachers. And so their complaints are not about France overall really slashing its education spending. It hasn't. But that it really hasn't been appropriately invested in the areas, again, outside of the city centers. Where you've had those spread to a lot of the city center schools where people are protesting education. in part in sympathy for those students and also in part because France does have a real problem in terms of particular sort of heat in schools and the ability to manage heat.

16:43 And you have major exams in France every year, the baccalaureate exam specifically, that comes in June. And there's been more frequent heat waves since then.

16:52 So this feeling of that something is wrong.

16:56 It's much more broadly held than just some of the specific complaints that these students had who first started protesting.

17:05 But as you point out, France has major budget problems.

17:07 Its tradition has been like, oh, you've got a major protest in the street, throw some money at it. until it goes away. And that's certainly been the case under Emmanuel Macron. That's what he did with the Yellow Vests in 2018.

17:20 That's what they did when.

17:21 They had high electricity prices after COVID. They spent a lot of money to try to subsidize electricity prices to prevent people from going out in the streets.

17:29 Or when you get farmer protests, the same idea is that they.

17:31 Announce new subsidies or new aid programs for farmers. But France's budget Its budget deficit situation specifically is really problematic.

17:41 It has been for a few years. France keeps missing its budget targets. Its debt is.

17:45 Almost 120 percent of its GDP, and they really can't afford to just throw money at it anymore. And so you have this conflict that's coming to a head where you have. France is working on its 2027 budget right now. It's essentially a lame duck government because you have a presidential election coming in April.

18:01 And May of next year.

18:03 So most people are, you know, you're trying to pass a budget, but nobody really wants to support it because everyone's going to want to change it should they win the presidential election while you have these students pushing for a lot more money, which really can't the government can't afford to spend at the moment, all because, as you pointed out, France's bond.

18:20 Yields have been soaring.

18:21 You know, interest rates have been going up around the world, but France's have gone up a lot faster, say, than Germany's. And that is because investors look at it and say, well, gosh, there's like students on the street.

18:32 It's going to be really hard to get a budget. And whatever budget.

18:35 Happens is probably not going to really reduce the deficit by that much. And we've got this all this political uncertainty between now and next year. So why would I want.

18:43 To be in France? Yeah.

18:45 And more focus also on Marine Le Pen and Jean-Luc Mélenchon as well, the kind of more extremes in terms of politics in France, at least according to a latest poll, those are the two that would reach a French presidential runoff, the latest polling showing that. So, I suppose, you know, there's a lot of political turmoil. How much do you really think that investors are losing faith then in France's ability to control its debt and deficit?

19:11 Yeah.

19:13 It seems like they really are losing a decent amount of faith.

19:16 I don't know if it's necessarily related to Le Pen and Mélenchon being strong in the polls.

19:21 They are, though polls also show.

19:24 Lots of various scenarios where you could get if the centrists sort of unite behind one candidate where it could be a centrist against Le Pen. Le Pen is very likely to be in the second place. round based on polls that have been going on for months at this point. But the concern is that regardless of who wins, that France is going to have a very difficult time with its debt and with its deficit. Because one of the the issues that you've had since 2024 is you've had a really divided National Assembly, lower house of the parliament, basically divided into three blocks that hasn't been able to decide anything. And it's not clear, even if there's a presidential election, which there will be in April and May,

20:03 that whoever wins is very likely to dissolve parliament. That's the tradition in France. But even if that happens and hold no elections, that happens. It's not clear that you will have a majority in parliament to do anything. So, again, if you're an investor, you're like, actually, I don't see any real way forward in the short or the medium term. So, again, if I can get a decent return by having German bunds, why on earth would I invest in French bonds?

20:29 But the thing is, we understand that France is kind of a pillar of Europe in terms of the size of its economy and its history in terms of leadership. The risks from this are also quite evident as well. What is the likelihood? How do we think about contagion, about spillover into other European bonds? And we've started to see it a little bit in the euro. Again, where would you put that in terms of scale right now?

20:59 So, I mean, there is no acute crisis at the moment. What you have is more of a slow-moving crisis. build toward crisis. As you said, there is some spillover already. You see it in particular in both Italian and Greek bonds, that they have been rising more quickly than German bonds have as well.

21:23 Again, but you have to put this in the context of rising.

21:26 Bond yields and rising interest rates around the world, or certainly around the Western world. And But you do see some of that contagion happening already. Are we at a crisis point in either the Euro or the European Union?

21:43 No, not yet.

21:44 And France's real economy is... Not doing fantastically, but it's not doing terribly either. So you don't have a massive economic crisis to go with this sort of this acute fiscal pain. So the answer is like, yes, it's a crisis. Yes, it appears to be weighing on the euro to some extent.

22:04 Yes, it is.

22:05 It is spreading a bit. So it's definitely something to be concerned about. But it's not. There's no doubt.

22:12 And it's not an acute crisis yet. But that said, you know, the old stereotype or the.

22:16 Old adage is that, you know, how do you go bankrupt? Slowly at first and then all at once.

22:20 Right. Crises have the same habit of doing the same thing. It's a very slow, very slow moving until it suddenly becomes very fast.

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