5 things to start your day: Europe

Good morning. French bonds are in focus after the 2025 budget announcement. Elon Musk unveils a Tesla robotaxi. The ECB may speed up policy

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Good morning. French bonds are in focus after the 2025 budget announcement. Elon Musk unveils a Tesla robotaxi. The ECB may speed up policy easing. Here's what people are talking about. Today's Five Things will be its last edition as a digital product. To keep you up to speed, you will automatically begin receiving the new, more expansive subscriber-only Markets Daily newsletter starting Oct. 14. Not a Bloomberg.com subscriber yet? You'll get a complimentary trial of Markets Daily. A version of Five Things Europe will still be available on the Bloomberg Terminal.

Budget verdict

French bond futures are slightly higher early on Friday after the government unveiled a budget for next year on Thursday. The spending plan — a crucial part of Prime Minister Michel Barnier's efforts to restore political and fiscal order — aims to deliver a €60.6 billion remedy for France's creaking public finances and rebuild investor confidence even as it risks eviction by a hostile parliament. Sentiment toward French bonds has taken a hit as the political upheaval of a hung parliament coincided with a sharp deterioration in the budget deficit, principally because tax receipts wilted. Parliament will start reviewing the proposals next week. Lawmakers can introduce amendments and the bill needs to be adopted by the end of the year.

Tesla's Cybercab

Elon Musk unveiled long-awaited prototypes of a Tesla robotaxi called Cybercab. He said production may start in 2026 and that the vehicle could cost less than $30,000. The CEO hitched a ride in one of the two-door sedans on his way to the stage at the carmaker's event late Thursday in Burbank, California. Musk also showcased a futuristic-looking Robovan concept that he said could transport 20 people at a time. The CEO's presentation lacked any technical detail of how Tesla will advance the suite of driver-assistance features it markets as Full Self-Driving to the point where consumers will no longer need to supervise the system. Musk said Tesla expects this capability to be available to Model 3 and Model Y owners in Texas and California next year. Speaking of taxis, read here for how Uber and Lyft used a loophole to deny NYC drivers millions in pay.

Officials unfazed

The debate over the pace of the Federal Reserve's easing goes on. Three Fed policymakers on Thursday were unfazed by a higher-than-forecast September inflation report, suggesting the central bank can continue cutting rates. Meanwhile, a fourth hinted he may favor a pause at their next meeting. Traders are pricing in a roughly 80% chance that the Fed will cut by a quarter of a percentage point when it meets in November. That compared with a fully priced-in move prior to last week's strong US jobs data. Treasuries were steady in Asian trading on Friday, as was a Bloomberg gauge of the greenback. Later in the day, US PPI and University of Michigan consumer sentiment may offer investors more clues to the Fed's likely rates path. Officials including Goolsbee, Logan and Bowman speak.

Faster easing

Meanwhile, the ECB will speed up interest-rate cuts over the months ahead to bolster the economy — taking borrowing costs to levels that no longer restrict demand by the end of 2025, according to a Bloomberg survey. With inflation now a touch below the 2% goal, analysts see the ECB decreasing its deposit rate by a quarter-point next week and at every meeting through March. Respondents then forecast two more reductions — in June and December — bringing the benchmark to 2%. The shift in expectations mirrors a similar recalibration by financial markets — spurred by data pointing to a shakier economy and more rapid disinflation in the 20-nation euro zone.

Rough end of week

Chinese stocks are having a rough end to their wild week. The country's equities fell, underperforming Asian peers, as caution grows ahead of a key weekend briefing that may shed more light on Beijing's fiscal stimulus. All eyes are on the Saturday presser, where China's finance minister will likely announce more support measures to revive a slowing economy. Investors and analysts expect Beijing to deploy as much as 2 trillion yuan ($283 billion) in fresh fiscal stimulus as authorities seek to boost growth and restore confidence. While uncertainty lingers over whether Chinese shares can extend their recent surge, some remain optimistic. For implications on European assets, read Mary's musings, below.

Coming up

We have UK industrial production and GDP on the data calendar, along with Germany CPI and Turkey current account. Central bank speakers include the ECB's Holzmann. JPMorgan and Wells Fargo kick off earnings season for the big Wall Street banks.

What we've been reading

This is what's caught our eye over the past 24 hours. London bosses are still waiting for Keir Starmer's grand growth plans Japan's Finance Ministry to suspend Nomura from debt auctions A record $6.47 trillion is piling up in US money-market funds TD to pay $3.1 billion in money laundering case, face asset cap Buffett cuts BofA stake below 10%, letting him trade in secret Citi banking head Raghavan shakes up team in hunt for profit Jane Street's India profits complicate fight with Millennium

And finally, here's what Mary is interested in this morning:

There is a lot at stake for European equities with the announcements from Chinese policymakers coming over the next few days. As Germany's largest trading partner, the weakness in the world's second-largest economy has been a significant drag for what is still the pivotal player in Europe. The impact of China's sagging growth has been a repeated theme highlighted by European officials. In 2023, the European Commission presented the potential implications of the structural challenges from China. Slower domestic spending directly translates into weaker import demand. Exports destined for China account for nearly 1.5% of EU GDP. In June 2024, the central bank also outlined the potential ramifications from slower Chinese growth would be larger for the eurozone than the US. The link between the two is undeniable. European stocks exposed to China make up about a third of the weighting in the Euro Stoxx 50 and cover a wide range of sectors -- dominated by cyclical stocks which will be dependent on the business cycle. That means key European companies need to see Chinese policymakers deploying policies that will revive consumer demand in the Asian nation. The bias for defensives within the European index will linger unless China's growth trajectory clearly improves. Mary Nicola is a macro strategist for Bloomberg's Markets Live team, based in Singapore.

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