October 6, 2025 • 17 mins
Your morning briefing, the business news you need in just 15 minutes.
On today's podcast:
(1) France’s Prime Minister Sebastien Lecornu resigned Monday just a day after President Emmanuel Macron named a new cabinet, deepening the country’s political crisis and sparking a selloff of French assets.
(2) Gold rose to another record — closing in on the $4,000 an ounce mark — as the US Federal government shutdown dragged on.
(3) President Donald Trump is pressing Israel and Hamas to seal a settlement to the two-year conflict that’s devastated Gaza and destabilized the Middle East as the warring sides are set to begin mediated talks on Monday.
(4) UK Home Secretary Shabana Mahmood will give police new powers to place limits on repeated protests and is considering legislation to ban them outright, after weeks of demonstrations led to mass arrests and strained resources.
(5) French President Emmanuel Macron’s decision to appoint a broadly unchanged cabinet sparked an immediate backlash from opposition parties, undermining Prime Minister Sebastien Lecornu’s chances of surviving a make-or-break week in parliament.
(6) OPEC+ is showing a cautious commitment to keep battling for a share of the global oil market — despite signs that a long-awaited surplus is starting to emerge.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Daybreak Youro podcast. Good morning, It's Monday,
the sixth of October. I'm Stephen Carolin Brussels and I'm.
Speaker 3 (00:16):
Lissie Verden in London.
Speaker 4 (00:17):
Coming up today, French Prime Minister Sebastian Lekochnu resigns after
President Macon's decision to appoint a largely unchanged cabinet sparks
and opposition backlash.
Speaker 2 (00:28):
French government bond yells spike and stocks tumble as investors
brace for more political uncertainty in the EU's second largest economy.
Speaker 4 (00:37):
Plus, the gold rush continues. The price of the precious
metal closes in on four thousand dollars. Announcers government borrowing
drives a flight to Haven's.
Speaker 5 (00:47):
Let's start with a round up of our top stories.
Speaker 3 (00:49):
Within the past hour.
Speaker 4 (00:50):
The French Prime Minister is Sebastian Lekochnu has resigned, the
move coming just a day after President Emmanuel Macon named
a new cabinet that was broadly criticized. This is Bloomberg's
Paris reporter Caroline Conna reacting to the news.
Speaker 6 (01:03):
We had lots of emails this morning from the French
government saying this there would be a handover this time
for Lucanu for hold on his coul there would be
another handover for b And now everything is collapsing already
three and a half weeks with this Prime Minister Sebastian Cornu,
and as many analysts have been saying all morning, we
(01:24):
are now getting very very close to perhaps new fresh legislative.
Speaker 4 (01:28):
Elections, Caroline Conna speaking there from our Paris bureau. French
bonds fell as investors braced for more political uncertainty. French
tenure yields have risen sharply after those headlines, and that
widened the nation's borrowing premium over German debt, a key
gauge of fiscal risk, to over eighty nine basis points,
at the highest level since late twenty twenty four.
Speaker 2 (01:49):
In Japan, Sanai Takeichi, a pro stimulus conservative, as poised
to become the country's first female prime minister. Japanese equities
led Asian stocks to an all time high following hers
win and the ruling.
Speaker 5 (02:01):
LDP's leadership race.
Speaker 2 (02:03):
While equity investors embraced the news, bond markets did not
longer dated Japanese bond slid with the forty year yield
surging as investors balance the potential upside of stimulus against
debt market risk with more. Here's our editor at large
in Tokyo, Sherry Anne.
Speaker 1 (02:19):
We know that Sanatatakaichi is a nationalist. We know that
she's a fan of Margaret Thatcher, a fan of heavy
metal music as well. But it's really the pro growth
policies that Sanattakaichi has talked about that is really the
focus for investors. She's talked about the bogspeezy monetary policy,
toned down her rhetoric during this election campaign, but we
(02:39):
know that she wants to continue expanding fiscal policy. She's
promised cash Handel's tax rebate, hinting at raising the tax
free income allowance as well.
Speaker 2 (02:49):
Chary Anne was speaking as analysts that Goldman Sachs warned
that volatility in Japan's longer dated bonds may now spill
over into markets as far away as the US and UK.
Scrutiny of longer day to debt in many developed economies
has increased, does government's ramp up borrowing.
Speaker 4 (03:05):
The growing fiscal concerns in some of the world's biggest
economies has seen some investors flocking to the perceived safety
of pressures.
Speaker 3 (03:11):
Metals and bitcoin.
Speaker 4 (03:12):
Gold hit another record today and is now closing in
on four thousand dollars an ounce, following a glittering run
that's seen it surge almost fifty percent this year. Bitcoin
meanwhile set another all time high over the weekend. Does
a broader risk rally around the US government shut down. BOYD,
the world's largest cryptocurrency OPEC.
Speaker 2 (03:29):
Plus, has agreed to return one hundred and thirty seven
thousand barrels a day of halted supply, a slower pace
than earlier this year. That's despite signs of a global
oil surplus starting to emerge after an earlier difference in
position between co leaders Saudi Arabia and Russia. Our reporter
Wayloon Soon says OPEC producers are each facing different circumstances.
Speaker 7 (03:51):
Some like Russia is actually trying to contend with like
increased attacks on its oil production capacity, so that's all
pulling back some of their potential production. We do see
some estimates for the one hundred and thirty seven thousand
barrels per day that or PET promise over the weekend.
Speaker 5 (04:10):
Actually Russia taks up about.
Speaker 7 (04:11):
A third of debt and a third of debt might
come under stress because of you, Princess hex on our
expot facilities.
Speaker 2 (04:19):
Bloomberg Whalen soon speaking there. The decision to drip feed
more barrels shows OPEC's commitment to keep battling for a
share of the oil market, but the market's forward curve
closely watched by opeka's faltering. Wall Street forecasters like JP
Morgan and Goldman Sachs expect the oiled price slide will
extend below sixty dollars a barrel.
Speaker 4 (04:41):
Representatives from Hamas and Israel are due to begin talks
in Egypt today and aimed at ending their two year
war in Gaza. The first sign of whether the negotiations
are serious will be whether Hamas releases the remaining hostages
in return for Israel releasing Palestinian prisoners. The US President
has laid out a twenty point plan to end the hostilities.
Speaker 3 (05:00):
He's talking up the prospects of a deal.
Speaker 5 (05:02):
They've been fighting for a plan for years.
Speaker 6 (05:05):
We get the usages back almost immediately. Negotiations are going
on right now, will probably take.
Speaker 5 (05:11):
A couple of days, and people are very happy.
Speaker 8 (05:13):
About it now.
Speaker 4 (05:15):
Despite his upbeat home Donald Trump has also made it
clear that he's losing patience with both Hamas and Israel.
Axios is reporting that the US president called Israel's Benjamin
Netanyahu over the weekend to discuss Hamas's apparent willingness to
release the hostages, but the Israeli Prime minister complained that
the offer was meaningless. Trump, according to the report, snapped
at Netanyahoo for being negative and added, this is a win.
Speaker 3 (05:37):
Take it, and.
Speaker 2 (05:39):
Those are your top stories on the markets. The kakarant
down two percent this morning, the ten year French government
yield up six basis points to three point five seven percent,
at an eighty seven basis point spread over the ten
year German yield. The Euro seven tenths weaker against the
dollar at one sixteen sixty two, the Bloomberg Dollar Spot
Index half a percent stronger, and we're continuing to see
(06:00):
weakness in the yen after the leadership election for the
LDP over the weekend. There So the Japanese yen one
point nine percent weeker against the dollar, hovering around one
fifty there.
Speaker 5 (06:12):
Well, Lizzie, what a moment for French politics.
Speaker 2 (06:16):
It feels like I money back from Paris from the
last time the government collapsed in France, and now we're
looking at Sebastian Laconnu, only around three weeks in the job,
resigning from the position after only unveiling his cabinet last night,
a cabinet that had a lot of familiar faces in it,
people in the same positions that they were the last
time around. But it wasn't enough for one of the
(06:38):
key parties that was supporting the government the last time
around to hang on, it seems, and that was part
of what it appears at this moment may have driven
Sebastian Lecornu to resign. And you know, yet another huge
moment that we're seeing on markets too.
Speaker 8 (06:53):
Yeah.
Speaker 4 (06:54):
A colleague has told me that Lacochnu has lasted less
than half of a Liz Truss and slightly more than
two scaramoot is just to put into context how brief
his tenure has been as Prime minister. But as you say,
it seems to be because of the backlash sparked among
the opposition parties that there was really a copy and
paste done when it came to picking that cabinet. Just
not enough compromise here for the opposition parties. We hadn't
(07:18):
even got to the budget yet and already Prime Minister
Lacochnu resigning this morning.
Speaker 2 (07:23):
Stephen, Well, let's bring some analysis of both the politics
and the market reaction.
Speaker 9 (07:27):
Now.
Speaker 2 (07:27):
We have Ben Silles with at our managing editor for
economics and government coverage in Europe, and our market supporter
Valerie Titala is with us as well.
Speaker 5 (07:34):
Ben.
Speaker 2 (07:35):
I'd like to start with you just give us a
sense of how dramatic this moment is. The bastard Leacannho
already gone before facing the threatened no confidence vote.
Speaker 10 (07:45):
Yeah, it's pretty dramatic, isn't it. I mean, we were
just done on morning news call this morning discussing how
likely and how quickly he was gonna this moment was
going to fall when my colleague in Paris piped up
to say, yeah, lacon Is just quit. So, I mean
it caught all of us what we've been expecting this
to happen, you know, certainly the next month or so,
(08:07):
perhaps this week, but most people have been surprised by
the pace of which it's moving. And yet it's pretty dramatic,
and it just speaks to the kind of deep, deep
underlying problems facing France as they try to try to
find out find a way to move forward.
Speaker 4 (08:23):
Ben, we're hearing that Lacock new is expected to speak
from his office around ten forty five am Paris time.
What are the typical next steps in a moment like this.
Speaker 10 (08:34):
So you've been through a question than Ben, The big yeah,
I mean, the big question is going to be will
this actually force Machran to dissolve parliament and call a
fresh election. That's what Marine Leapenn's national rally are calling
for this morning. That would seem to be the logical step.
(08:54):
But at the same time, a lot of people point out,
and particularly people in the Macron camp, that a fresh
election is not likely to resolve the fundamental problems that
the Parliament is divided between three main blocks which are
pretty kind of antagonistic to each other. So it's all
(09:18):
the line impossible to forge a consensus, certainly a majority
behind any sort of budget strategy.
Speaker 2 (09:25):
Let's bring in our market support of Valerie title has
been across the moves that we've seen on markets on
the back of this, I mean Valerie. Even in the
early trades before we had this latest headline, we were
seeing pressure on French government borrowing costs. Just put in context,
the moves that we've seen this morning on bond markets.
Speaker 8 (09:40):
Well, when it comes to the French Germans spread, which
is a real measure of worries over government's deficit sustainability,
should I say, for the French government, we are seeing
that spread widen six basis points in today's a trade.
It's very interesting though we are seeing yields rise in France,
but it does look like there is a safety bid
into German buns and there is a safety bid into treasuries.
(10:02):
Now I think this is key because what the market
is really worried about is these fiscal dominance moments happening
not one by one, but all at once. Remember we
had one overnight in Japan, the surprise election there with
the big spender likely to become the new prime minister.
So we already had fixed income trading week before this
(10:23):
announcement that the PM was going to resign in France.
And at least for now, it does feel like bond
markets have reached some sort of stability because we're seeing
that bid into treasuries, so that's nice to see at
least when it comes to the market calming down, though,
we are seeing sustained weakness in the euro it is
still sliding down over seven tens of one percent, and
(10:43):
the equity market at least when it comes to France
also on a back foot. The CAC forty down near
two percent. Weakness in French banks which is not a
decent thing to see, but that could all be tied
to the weakness.
Speaker 5 (10:54):
In French bonds.
Speaker 8 (10:55):
Remember, a lot of these French banks will be sitting
heavily on French debt, so the ability of French oaits
and matters a lot for these banks profitability.
Speaker 4 (11:04):
Yeah, we're looking at the likes of Bay and pay
Power about down more than five percent, CLDIACA call four
point eight percent, SoC GEN six point two percent lower.
Off the back of this news and just in terms
of the politics, we've had Jordan Bardella of the National
Rally calling for President Imaginel Macon to dissolve the National Assembly.
But look, this is very much in line with their
position for months now. Not much change there. Well, I
(11:26):
wonder how you would be thinking about the markets over
the next few weeks when we are discussing whether Macon's
position is intenable.
Speaker 8 (11:33):
Look, I think for the markets you need a stable government.
That's step one, and then you need a government that
is going to stop spending.
Speaker 5 (11:39):
That's step two.
Speaker 8 (11:40):
Both of those steps have been very hard for France
in last few weeks, if not the last year, year
and a half. Now, when it comes to perhaps the
new general elections, I think that would be maybe seen
as a positive for the market because you have to
think that there needs to be something shaken up in
French politics in order to get a strong government. The
(12:01):
market wants to see a strong government. The bond market
wants to see a strong government. We haven't had one
under Macron, but I think the market will start to
think could we have one under a different leader that
could turn the tide around.
Speaker 3 (12:12):
Now that is a big.
Speaker 8 (12:13):
Question, Lizzie, because we also know that even a government
has a massive majority like here in the UK, has
had issues raining and spending. So it really starts to
beg the question whether the market does really need to
blow up in order to get these politicians on the
right side of the trade here to calm the bomb
market down. Now, it's not just the people in power,
(12:34):
but it's also the French people. There's a lot to
be absorbed, at least in terms of changing their direction. Remember,
there's a lot of pushback on these kind of pension reforms.
Those are the things the bond market wants, but it's
going to be very difficult to get that on the table.
Speaker 5 (12:51):
Stay with us.
Speaker 2 (12:52):
More from Bloomberg Daybreak Europe coming up after this Ben
How likely does that election to the National Assembly?
Speaker 5 (12:59):
See?
Speaker 2 (13:00):
Now, this is an option that Emmanuel Macron didn't have
last December when Michelle Barney felt he could have done
it three weeks ago when Sebastian Leacaranu was accepted as
the new Prime minister. Is that the logical path now
for the French president?
Speaker 10 (13:16):
I think probably not, to be honest, I think that
you know, it's more likely to make things worse for
Macron than to make things better, And so if you
kind of like analyze the merits of that option on
its own terms, it seems unlikely. That said, all of
the other options look pretty grim as well. And I
(13:38):
think that the fundamental issue here is that it's Macron
who is the problem. And until twenty twenty seven when
his term his term ends and will have a new
presidential election which will which will afford a real fundamental
reset for French politics, I think we're going to be
going round and round in this impact. I mean, obviously,
(14:01):
another question there is whether Macron himself might quit and
trigger a an early presidential election. That is something that
he has insisted he will not do, but it does
seem to be the only thing that could really get
France unblocked in the next eighteen months.
Speaker 4 (14:22):
I suppose a question to both of you is, wouldn't
Marine Lapenn be worse for the market?
Speaker 10 (14:27):
Ben?
Speaker 3 (14:27):
Are we closer to seeing the far right in the Alise.
Speaker 10 (14:30):
Well getting closer? I think that for the twenty twenty
seven election, if that's when it comes, the scenario is
going to be La Penn or if she's allowed to run,
Lapenn if not, Bardella will be in the final two
for the runoff. The question of who will be facing
her is wide open. And then the issue will be
(14:56):
whether this Republican Front, which has conser distantly prevented La
Penn getting into power in the last two elections against Macron,
whether that holds. We saw it weaker in twenty twenty
two versus twenty seventeen. She is stronger now than she
was then, the establishment forces are weaker, She's getting closer,
(15:19):
and twenty twenty seven would for sure be her best chance.
Speaker 2 (15:22):
Yet, Valerie, Just back to you on the market's perspective.
From here, we're in the position of uncertainty now as
to what happens next. But how long will markets give
French President of Vanuel Macron to try to come up
with some sort of solution of this before we see
things get even worse in terms of borrowing costs.
Speaker 8 (15:41):
Look, Stephen, that's a good question. I mean, it could
really all be down to the global markets, frankly, and
we've seen quite a decent rally in the treasury market
in the last six weeks, last month and a half,
and that has taken some pressure off of global bonds.
But that could be something that could easily be turned around.
If you have perhaps sell off in the treasury market,
(16:01):
to sell off in the JGB market all happening at
the same time this instability is happening in France, it
could really start to pressure the government sooner rather than later.
But on the flip side, Stephen, let's say you have
the US economy slowing down, you see a decent treasury rally,
especially when it comes to those long end yields, that
could really be something that could help the French government
(16:22):
have a bit more time on their hands when it
comes to reforming the government.
Speaker 2 (16:27):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 9 (16:33):
Look for us on your podcast feed every morning, on Apple, Spotify,
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Speaker 2 (16:40):
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Speaker 9 (16:45):
Our flagship New York station, is also available on your
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I'm Caroline Hepka.
Speaker 2 (16:54):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day, right
here on Bloomberg day Break Europe.
Speaker 1 (17:03):
M mm hmm
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:10):
This is the Bloomberg Daybreak Youro podcast. Good morning, It's Monday,
the sixth of October. I'm Stephen Carolin Brussels and I'm.
Speaker 3 (00:16):
Lissie Verden in London.
Speaker 4 (00:17):
Coming up today, French Prime Minister Sebastian Lekochnu resigns after
President Macon's decision to appoint a largely unchanged cabinet sparks
and opposition backlash.
Speaker 2 (00:28):
French government bond yells spike and stocks tumble as investors
brace for more political uncertainty in the EU's second largest economy.
Speaker 4 (00:37):
Plus, the gold rush continues. The price of the precious
metal closes in on four thousand dollars. Announcers government borrowing
drives a flight to Haven's.
Speaker 5 (00:47):
Let's start with a round up of our top stories.
Speaker 3 (00:49):
Within the past hour.
Speaker 4 (00:50):
The French Prime Minister is Sebastian Lekochnu has resigned, the
move coming just a day after President Emmanuel Macon named
a new cabinet that was broadly criticized. This is Bloomberg's
Paris reporter Caroline Conna reacting to the news.
Speaker 6 (01:03):
We had lots of emails this morning from the French
government saying this there would be a handover this time
for Lucanu for hold on his coul there would be
another handover for b And now everything is collapsing already
three and a half weeks with this Prime Minister Sebastian Cornu,
and as many analysts have been saying all morning, we
(01:24):
are now getting very very close to perhaps new fresh legislative.
Speaker 4 (01:28):
Elections, Caroline Conna speaking there from our Paris bureau. French
bonds fell as investors braced for more political uncertainty. French
tenure yields have risen sharply after those headlines, and that
widened the nation's borrowing premium over German debt, a key
gauge of fiscal risk, to over eighty nine basis points,
at the highest level since late twenty twenty four.
Speaker 2 (01:49):
In Japan, Sanai Takeichi, a pro stimulus conservative, as poised
to become the country's first female prime minister. Japanese equities
led Asian stocks to an all time high following hers
win and the ruling.
Speaker 5 (02:01):
LDP's leadership race.
Speaker 2 (02:03):
While equity investors embraced the news, bond markets did not
longer dated Japanese bond slid with the forty year yield
surging as investors balance the potential upside of stimulus against
debt market risk with more. Here's our editor at large
in Tokyo, Sherry Anne.
Speaker 1 (02:19):
We know that Sanatatakaichi is a nationalist. We know that
she's a fan of Margaret Thatcher, a fan of heavy
metal music as well. But it's really the pro growth
policies that Sanattakaichi has talked about that is really the
focus for investors. She's talked about the bogspeezy monetary policy,
toned down her rhetoric during this election campaign, but we
(02:39):
know that she wants to continue expanding fiscal policy. She's
promised cash Handel's tax rebate, hinting at raising the tax
free income allowance as well.
Speaker 2 (02:49):
Chary Anne was speaking as analysts that Goldman Sachs warned
that volatility in Japan's longer dated bonds may now spill
over into markets as far away as the US and UK.
Scrutiny of longer day to debt in many developed economies
has increased, does government's ramp up borrowing.
Speaker 4 (03:05):
The growing fiscal concerns in some of the world's biggest
economies has seen some investors flocking to the perceived safety
of pressures.
Speaker 3 (03:11):
Metals and bitcoin.
Speaker 4 (03:12):
Gold hit another record today and is now closing in
on four thousand dollars an ounce, following a glittering run
that's seen it surge almost fifty percent this year. Bitcoin
meanwhile set another all time high over the weekend. Does
a broader risk rally around the US government shut down. BOYD,
the world's largest cryptocurrency OPEC.
Speaker 2 (03:29):
Plus, has agreed to return one hundred and thirty seven
thousand barrels a day of halted supply, a slower pace
than earlier this year. That's despite signs of a global
oil surplus starting to emerge after an earlier difference in
position between co leaders Saudi Arabia and Russia. Our reporter
Wayloon Soon says OPEC producers are each facing different circumstances.
Speaker 7 (03:51):
Some like Russia is actually trying to contend with like
increased attacks on its oil production capacity, so that's all
pulling back some of their potential production. We do see
some estimates for the one hundred and thirty seven thousand
barrels per day that or PET promise over the weekend.
Speaker 5 (04:10):
Actually Russia taks up about.
Speaker 7 (04:11):
A third of debt and a third of debt might
come under stress because of you, Princess hex on our
expot facilities.
Speaker 2 (04:19):
Bloomberg Whalen soon speaking there. The decision to drip feed
more barrels shows OPEC's commitment to keep battling for a
share of the oil market, but the market's forward curve
closely watched by opeka's faltering. Wall Street forecasters like JP
Morgan and Goldman Sachs expect the oiled price slide will
extend below sixty dollars a barrel.
Speaker 4 (04:41):
Representatives from Hamas and Israel are due to begin talks
in Egypt today and aimed at ending their two year
war in Gaza. The first sign of whether the negotiations
are serious will be whether Hamas releases the remaining hostages
in return for Israel releasing Palestinian prisoners. The US President
has laid out a twenty point plan to end the hostilities.
Speaker 3 (05:00):
He's talking up the prospects of a deal.
Speaker 5 (05:02):
They've been fighting for a plan for years.
Speaker 6 (05:05):
We get the usages back almost immediately. Negotiations are going
on right now, will probably take.
Speaker 5 (05:11):
A couple of days, and people are very happy.
Speaker 8 (05:13):
About it now.
Speaker 4 (05:15):
Despite his upbeat home Donald Trump has also made it
clear that he's losing patience with both Hamas and Israel.
Axios is reporting that the US president called Israel's Benjamin
Netanyahu over the weekend to discuss Hamas's apparent willingness to
release the hostages, but the Israeli Prime minister complained that
the offer was meaningless. Trump, according to the report, snapped
at Netanyahoo for being negative and added, this is a win.
Speaker 3 (05:37):
Take it, and.
Speaker 2 (05:39):
Those are your top stories on the markets. The kakarant
down two percent this morning, the ten year French government
yield up six basis points to three point five seven percent,
at an eighty seven basis point spread over the ten
year German yield. The Euro seven tenths weaker against the
dollar at one sixteen sixty two, the Bloomberg Dollar Spot
Index half a percent stronger, and we're continuing to see
(06:00):
weakness in the yen after the leadership election for the
LDP over the weekend. There So the Japanese yen one
point nine percent weeker against the dollar, hovering around one
fifty there.
Speaker 5 (06:12):
Well, Lizzie, what a moment for French politics.
Speaker 2 (06:16):
It feels like I money back from Paris from the
last time the government collapsed in France, and now we're
looking at Sebastian Laconnu, only around three weeks in the job,
resigning from the position after only unveiling his cabinet last night,
a cabinet that had a lot of familiar faces in it,
people in the same positions that they were the last
time around. But it wasn't enough for one of the
(06:38):
key parties that was supporting the government the last time
around to hang on, it seems, and that was part
of what it appears at this moment may have driven
Sebastian Lecornu to resign. And you know, yet another huge
moment that we're seeing on markets too.
Speaker 8 (06:53):
Yeah.
Speaker 4 (06:54):
A colleague has told me that Lacochnu has lasted less
than half of a Liz Truss and slightly more than
two scaramoot is just to put into context how brief
his tenure has been as Prime minister. But as you say,
it seems to be because of the backlash sparked among
the opposition parties that there was really a copy and
paste done when it came to picking that cabinet. Just
not enough compromise here for the opposition parties. We hadn't
(07:18):
even got to the budget yet and already Prime Minister
Lacochnu resigning this morning.
Speaker 2 (07:23):
Stephen, Well, let's bring some analysis of both the politics
and the market reaction.
Speaker 9 (07:27):
Now.
Speaker 2 (07:27):
We have Ben Silles with at our managing editor for
economics and government coverage in Europe, and our market supporter
Valerie Titala is with us as well.
Speaker 5 (07:34):
Ben.
Speaker 2 (07:35):
I'd like to start with you just give us a
sense of how dramatic this moment is. The bastard Leacannho
already gone before facing the threatened no confidence vote.
Speaker 10 (07:45):
Yeah, it's pretty dramatic, isn't it. I mean, we were
just done on morning news call this morning discussing how
likely and how quickly he was gonna this moment was
going to fall when my colleague in Paris piped up
to say, yeah, lacon Is just quit. So, I mean
it caught all of us what we've been expecting this
to happen, you know, certainly the next month or so,
(08:07):
perhaps this week, but most people have been surprised by
the pace of which it's moving. And yet it's pretty dramatic,
and it just speaks to the kind of deep, deep
underlying problems facing France as they try to try to
find out find a way to move forward.
Speaker 4 (08:23):
Ben, we're hearing that Lacock new is expected to speak
from his office around ten forty five am Paris time.
What are the typical next steps in a moment like this.
Speaker 10 (08:34):
So you've been through a question than Ben, The big yeah,
I mean, the big question is going to be will
this actually force Machran to dissolve parliament and call a
fresh election. That's what Marine Leapenn's national rally are calling
for this morning. That would seem to be the logical step.
(08:54):
But at the same time, a lot of people point out,
and particularly people in the Macron camp, that a fresh
election is not likely to resolve the fundamental problems that
the Parliament is divided between three main blocks which are
pretty kind of antagonistic to each other. So it's all
(09:18):
the line impossible to forge a consensus, certainly a majority
behind any sort of budget strategy.
Speaker 2 (09:25):
Let's bring in our market support of Valerie title has
been across the moves that we've seen on markets on
the back of this, I mean Valerie. Even in the
early trades before we had this latest headline, we were
seeing pressure on French government borrowing costs. Just put in context,
the moves that we've seen this morning on bond markets.
Speaker 8 (09:40):
Well, when it comes to the French Germans spread, which
is a real measure of worries over government's deficit sustainability,
should I say, for the French government, we are seeing
that spread widen six basis points in today's a trade.
It's very interesting though we are seeing yields rise in France,
but it does look like there is a safety bid
into German buns and there is a safety bid into treasuries.
(10:02):
Now I think this is key because what the market
is really worried about is these fiscal dominance moments happening
not one by one, but all at once. Remember we
had one overnight in Japan, the surprise election there with
the big spender likely to become the new prime minister.
So we already had fixed income trading week before this
(10:23):
announcement that the PM was going to resign in France.
And at least for now, it does feel like bond
markets have reached some sort of stability because we're seeing
that bid into treasuries, so that's nice to see at
least when it comes to the market calming down, though,
we are seeing sustained weakness in the euro it is
still sliding down over seven tens of one percent, and
(10:43):
the equity market at least when it comes to France
also on a back foot. The CAC forty down near
two percent. Weakness in French banks which is not a
decent thing to see, but that could all be tied
to the weakness.
Speaker 5 (10:54):
In French bonds.
Speaker 8 (10:55):
Remember, a lot of these French banks will be sitting
heavily on French debt, so the ability of French oaits
and matters a lot for these banks profitability.
Speaker 4 (11:04):
Yeah, we're looking at the likes of Bay and pay
Power about down more than five percent, CLDIACA call four
point eight percent, SoC GEN six point two percent lower.
Off the back of this news and just in terms
of the politics, we've had Jordan Bardella of the National
Rally calling for President Imaginel Macon to dissolve the National Assembly.
But look, this is very much in line with their
position for months now. Not much change there. Well, I
(11:26):
wonder how you would be thinking about the markets over
the next few weeks when we are discussing whether Macon's
position is intenable.
Speaker 8 (11:33):
Look, I think for the markets you need a stable government.
That's step one, and then you need a government that
is going to stop spending.
Speaker 5 (11:39):
That's step two.
Speaker 8 (11:40):
Both of those steps have been very hard for France
in last few weeks, if not the last year, year
and a half. Now, when it comes to perhaps the
new general elections, I think that would be maybe seen
as a positive for the market because you have to
think that there needs to be something shaken up in
French politics in order to get a strong government. The
(12:01):
market wants to see a strong government. The bond market
wants to see a strong government. We haven't had one
under Macron, but I think the market will start to
think could we have one under a different leader that
could turn the tide around.
Speaker 3 (12:12):
Now that is a big.
Speaker 8 (12:13):
Question, Lizzie, because we also know that even a government
has a massive majority like here in the UK, has
had issues raining and spending. So it really starts to
beg the question whether the market does really need to
blow up in order to get these politicians on the
right side of the trade here to calm the bomb
market down. Now, it's not just the people in power,
(12:34):
but it's also the French people. There's a lot to
be absorbed, at least in terms of changing their direction. Remember,
there's a lot of pushback on these kind of pension reforms.
Those are the things the bond market wants, but it's
going to be very difficult to get that on the table.
Speaker 5 (12:51):
Stay with us.
Speaker 2 (12:52):
More from Bloomberg Daybreak Europe coming up after this Ben
How likely does that election to the National Assembly?
Speaker 5 (12:59):
See?
Speaker 2 (13:00):
Now, this is an option that Emmanuel Macron didn't have
last December when Michelle Barney felt he could have done
it three weeks ago when Sebastian Leacaranu was accepted as
the new Prime minister. Is that the logical path now
for the French president?
Speaker 10 (13:16):
I think probably not, to be honest, I think that
you know, it's more likely to make things worse for
Macron than to make things better, And so if you
kind of like analyze the merits of that option on
its own terms, it seems unlikely. That said, all of
the other options look pretty grim as well. And I
(13:38):
think that the fundamental issue here is that it's Macron
who is the problem. And until twenty twenty seven when
his term his term ends and will have a new
presidential election which will which will afford a real fundamental
reset for French politics, I think we're going to be
going round and round in this impact. I mean, obviously,
(14:01):
another question there is whether Macron himself might quit and
trigger a an early presidential election. That is something that
he has insisted he will not do, but it does
seem to be the only thing that could really get
France unblocked in the next eighteen months.
Speaker 4 (14:22):
I suppose a question to both of you is, wouldn't
Marine Lapenn be worse for the market?
Speaker 10 (14:27):
Ben?
Speaker 3 (14:27):
Are we closer to seeing the far right in the Alise.
Speaker 10 (14:30):
Well getting closer? I think that for the twenty twenty
seven election, if that's when it comes, the scenario is
going to be La Penn or if she's allowed to run,
Lapenn if not, Bardella will be in the final two
for the runoff. The question of who will be facing
her is wide open. And then the issue will be
(14:56):
whether this Republican Front, which has conser distantly prevented La
Penn getting into power in the last two elections against Macron,
whether that holds. We saw it weaker in twenty twenty
two versus twenty seventeen. She is stronger now than she
was then, the establishment forces are weaker, She's getting closer,
(15:19):
and twenty twenty seven would for sure be her best chance.
Speaker 2 (15:22):
Yet, Valerie, Just back to you on the market's perspective.
From here, we're in the position of uncertainty now as
to what happens next. But how long will markets give
French President of Vanuel Macron to try to come up
with some sort of solution of this before we see
things get even worse in terms of borrowing costs.
Speaker 8 (15:41):
Look, Stephen, that's a good question. I mean, it could
really all be down to the global markets, frankly, and
we've seen quite a decent rally in the treasury market
in the last six weeks, last month and a half,
and that has taken some pressure off of global bonds.
But that could be something that could easily be turned around.
If you have perhaps sell off in the treasury market,
(16:01):
to sell off in the JGB market all happening at
the same time this instability is happening in France, it
could really start to pressure the government sooner rather than later.
But on the flip side, Stephen, let's say you have
the US economy slowing down, you see a decent treasury rally,
especially when it comes to those long end yields, that
could really be something that could help the French government
(16:22):
have a bit more time on their hands when it
comes to reforming the government.
Speaker 2 (16:27):
This is Bloomberg Daybreak Europe, your morning brief on the
stories making news from London to Wall Street and beyond.
Speaker 9 (16:33):
Look for us on your podcast feed every morning, on Apple, Spotify,
and anywhere else you get your podcasts.
Speaker 2 (16:40):
You can also listen live each morning on London Dab Radio,
the Bloomberg Business app, and Bloomberg dot Com.
Speaker 9 (16:45):
Our flagship New York station, is also available on your
Amazon Alexa devices. Just say Alexa play Bloomberg eleven thirty.
I'm Caroline Hepka.
Speaker 2 (16:54):
And I'm Stephen Carroll. Join us again tomorrow morning for
all the news you need to start your day, right
here on Bloomberg day Break Europe.
Speaker 1 (17:03):
M mm hmm
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