>> shellshocked. as crude continues to slide, the oil giant says it will cut spending by $15 billion. greek banks will survive. that is the view from the ecb as the market takes its cue. stocks stabilize in athens. and, a break on the menu. mcdonald's promotes u.k. native steve easterbrook to be its next ceo. good morning, everybody. welcome. you are watching."

-- you are watching "the pulse." i'm guy johnson. this morning shell was the first major oil producer to post earnings since crude prices fell by more than a half area that has happened over the last six months. oil is down today with crude below $45 a barrel. let's bring in mark barton. mark, let's start with you. >> i think the line that i took away from the interview was, we enter this period with strength. we knew volatility would came back. we aimed to preserve flexibility. it goes back to what he did a year ago. he said, he wanted to make these hard choices on new projects $15 billion of assets over 2014 and 2015, and slow the investment growth. i just cut to the taste. they missed earnings estimates.

they had a horrid quarter. faltering production, escalating costs, trimming earnings to a four-year low. i cut to the chase, you missed earnings. why the gap? >> it was the sharply lower oil price coming through in our upstream earnings. our downstream earnings were pretty strong. if i look at the year in totality, we had a strong year in which we delivered what we said we would do. a much stronger underlying performance in general and a much improved financial performance. more capital discipline. we delivered some very significant projects during the year that are still wrapping up. i think we are entering a period of uncertainty and volatility but we are entering that with a much stronger position than a year before. >> on your capital discipline front, you are going to cut

capital expenditures by $15 billion. what projects are going to be affected? >> it is a range of projects, mark. when we looked at what is going to happen in the next few years, we are not immune to lower oil prices, so we see pressure on our program. we see it as an opportunity to cut cost from the supply chain. we will be working hard to reduce capital cost per project, given by the opportunities we see as well. at the same time, we felt we needed to cap the investment levels at no higher than what we had last year. we have deferred or canceled $15 billion worth of projects. we are now at an investment level where we know we can come down further if the oil price outlook warrants that. at the same time, this is also a

period where we need to preserve midterm growth. in my mind, it is a game of being very prudent with the current outlook, but at the same time not overreacting to the low oil prices. we need to preserve our midterm growth. >> on the oil price itself, i tried to get a price out of him a price forecast. he said, we always get that wrong. he says over the long-term, oil will revert to much higher levels. i love this quote, the best remedy against low oil prices is lower oil prices. >> not the first one to say that. >> i love the comments -- he said that if production investment isn't sustained, prices could go to $200. he said, i'd be foolish to go down that road, but the more we hold back investment, the more vigorously it will bounce back.

>> it is a balancing back. we are talking about how easy is it to get the balance right. >> it is very difficult. at the moment, we don't know where the bottom is. we don't know where the bottom is yet and we don't know how likely the price when we do reach the bottom, is going to be sustained when recovery will begin, and at what pace it will begin. he is right, actually. he used the word "prudent" and he talked about the midterm. because of the need for more oil in the longer term for developing countries, there will need to be projects. shell is going to position itself i cutting its cost as much as it can, becoming as lean as possible and staying as many projects as it can for the time when there is a clear up and prices are going to rise, so they will reap the benefits. >> is he right in saying, the

lower the oil price goes, the higher chance it bounces back vigorously? >> i don't think that is necessarily true. we are all saying that the low oil price is going to kill production growth in the high-cost areas. it will almost certainly, because companies like shell are cutting investment. on the other side of the balance, people that think the low oil prices going to lead to a bonanza in terms of oil demand are wrong as well. a, because in the developed world there is a much or market that isn't going to be much demand. in the developing countries what we're already seeing is that they are taking advantage of lower oil prices to start reducing or eliminating subsidies for oil products. so, demand growth is not going to rebound very strongly in those countries. it is a very different picture

than a year ago. >> which is cheaper right now, investing in new production or buying new production off the shelf? going and looking for oil reserves on the stock market rather than -- >> i would think it is going to wall street to buy assets. there are going to be companies -- this comes back to the discussion about potential merger and acquisition action -- >> i asked him. i said, could we see a return to the late 1990's when we saw lots of big players come together? i said, is it out of the question to see a scenario when some of the big five come together? he wasn't going there, once again. >> it is fairly obvious that there are players among what we

might call the second-tier oil companies, people like hello but i won't single them out. there are plenty of others as well who have seen their share prices tumble, investment plans cut back. there are companies out there that have got some very interesting projects which could be attractive in the long term. in the long term, those projects are almost certainly going to be needed. >> what about the dividend? it is sacrosanct, isn't it? we've got $20 billion of cash on the balance sheet. he said, we can weather the storm better than anyone else. >> i think for shell, that is almost certainly true. it is almost certainly true for the other big majors, with the exception of bp, which has special circumstances. for a company like shell, where

it cannot pay the dividend, that would be an enormous statement. shell is rolling in pension funds and there is a reliable investment for millions of people. but i don't think that's an issue as far as shell is concerned. >> shall we talk about bp? it is the one that stands out. its balance sheet is weak doesn't have the same options. we don't have any visibility on that yet. when you look at how the chips are going to fall, this time next year, two years time should bp be an independent company? >> two years might be a little soon. we don't yet know what the actual oil market environment is going to be. because of the fact that liability'ies from the mexico disaster are not quantified, it would be a huge gamble on the part of even someone as mighty

as exxon mobil who we talked about as a potential buyer of bp, or even shell. even for companies of that magnitude, it is a huge risk. not just the risk from the gulf of mexico fallout, but the fact that bp is now so heavily committed to russia. that's another factor which weighs heavily in the consideration. >> quickly on the oil price, i asked mr. van beurden, didn't get an answer. you are going to give me an answer. we seem to have found some sort of floor. we have bottomed around $45, haven't we? >> i've used the phrase, it is like a bungee jump. the market jumps off a cliff. it is going down, down, and occasionally, it seems to get snagged on the way. the price has been snagged just

below $50 a battle. yesterday's numbers from the united states, the crude oil stocks, showed a record high for crude oil stocks. over 400 million barrels. if you look at the supply-demand numbers put out every month, the implied overhang remains very high for some months to come. unless something changes on the supply side or the demand side it is hard to see how the pric e can stay where it currently is. all i did was, i took it down. just as a silly arithmetical illustration. i took the view that in 2008 the underlying market fundamentals at that time was

actually rather more favorable than it is today. >> you guys get a lot of visibility on this. how many vlcc's are there? >> about 350. >> how many of those are still -- >> that is a good question. there has been a big increase in chartering recently. there is an issue of definition. ships have to be -- unless you have transparency where you talk to one side of the transaction, they tell you the situation, you have to see that the ship has gone somewhere which qualifies an anchorage and hasn't moved for six or eight weeks before you know that it is definitely -- >> and your sense is? >> our sense is that the amount of storage is rising and will continue to rise. there is availability of ships. all this oil that is surplus in the market is going to have to

go somewhere. >> nice to see you. thank you very much indeed. neil atkinson. and of course, mark barton. what else is on our radar? alibaba set to report earnings today. estimates compiled by bloomberg suggest a 6.8% rise in net income. investors will be looking for clues on alibaba's mobile business performance and response to government allegations it isn't doing enough to combat online fraud. eu prime ministers are gathering in brussels to consider new sanctions against russia. the meeting comes after violence between russian-backed rebels and ukrainian troops. greece's new government has questioned the need for further sanctions. mcdonald's is in its worst sales slump in over a decade. it ceo is paying the price. don thompson will leave in march, after three years in the

role. british-born executive steve easterbrook will be taking over. that takes us to our twitter question. what british food would work at mcdonald's? we've had various suggestions in the newsroom. i'm sure you can come up with far more witty responses. fish and chips is the obvious one. use your imagination. we would love to hear from you. still ahead, exclusive comments from the ecb chair. does she think greek banks are strong enough to survive a crisis? ♪

>> welcome back. you are watching "on the move." -- you are watching "the pulse." we are live on bloomberg tv. we've got it all covered. greek banks, big story. they will survive. that is according to the ecb supervisory board. $11 billion in market value was wiped out from greek banks in the first three trading days of this week. stabilizing this morning, a little bit. the chairman of the ecb advisory board talked to hans nichols. he joins us now from frankfurt. what did she say? >> difficulty was the word she used to describe the situation the greek banks are in after the

election. she said they've done a much better job strengthening their balance sheet since the crisis and seemed to express some confidence in their ability to whether this. >> the greek banks are facing a difficult situation because of the recent elections. they are pretty strong. a lot of good work has been done on the balance sheet during the last years. >> do you think they need to do more to strengthen their balance sheet? >> they need to manage in a conservative fashion their liquidity position. that is the main focus right now. >> so you are not concerned? >> i'm following them during the

situation that is not exactly business as usual. >> guy while we were talking to her, it came out that the outflows from greek banks in the month of january before the election was 11 billion euros. yesterday, greek bank stocks were down some 27%. this morning, they are up. at one point, i saw them up 7%. now, i think the index is up 2%. still, credit default swaps, 70% probability there would be a great the fault in five years. >> some of the numbers floating around athens. i think the numbers fairly comparable the banks and the economy heavily linked. you talked about the effect of qe and the impact it has on the financials. aside from greece, what did she say about that?

>> no one disputes the fact that the banks are going to be competing to gobble up sovereign debt. the ecb wants to buy 45 billion of it every month. i asked what it will do to profitability. she said you will see some strength from stronger corporates. have a listen to what she said the different outcomes could be. >> it may have a different effect producing more growth and importing the credit quality of the corporates, for example. it can also have a less good effect on profitability. profitability is a matter of concern for european banks, and has been for the previous months. so this is something that we have been following and we go on

following. >> guy, less good effects on profitability. banks are having a hard time. we saw a earnings in the states pretty dismal. deutsche bank surprised on the upside this morning. we are trying to figure out where and why that is the case. they set aside less money for legal provisions. only 207 million euros versus 1.1 billion this quarter last year. profitability, clearly something they are monitoring here in frankfurt as well as the situation in greece. >> there's a lot on their plate right now. i think they've got to figure out what is going to happen. what i think is interesting is, this relationship between qe and the real economy and how much regulators are sitting in the middle and may blocking the banks' ability to deliver credit to the real economy.

>> if banks are going to be having less return on equity based on their ability of competing with the ecb that is going to be a drain on them. at the same time, if it does filter through to the corporates you see daniele nouy's point that you could have some strength. it is a question of which outweighs the other. right now the only thing they can do is monitoring it. remember, she is wearing two hats. she is the main regulator, but her counterpart wants to see the banks lend a little bit more, have more juice in the economy. that is a different dual mandate. they are chasing two rabbits. >> great work. thank you very much indeed, hans nichols. talking to daniele nouy about what is happening in the banking

sector. she's got some more views that we are going to share with you later on. look forward to those comments. coming up, we are going to be talking about facebook. mark zuckerberg plans to spend now, chase opportunities. we have the story behind facebook's mobile strategy, coming up next. ♪

>> welcome back. you are watching "the pulse."

we are live on bloomberg television, on the radio streaming on your tablet, on bloomberg.com. let's get you some company news. mr. zuckerberg is spending faster in the mobile sector as sales growth of facebook slowed in the fourth quarter. here's what he had to say about his progress so far. >> 2014 was also a year of big investment in our future. this year, we make it gets -- big bets. we focus on serving our community better improving our search and video, and improving the efficiency of our mobile apps. >> shake shack is set to get bigger and investors are backing it. the burger train has increased the price range for its upcoming ipo. it is seeking as much as $675

million. coming up, less than three years on, the job of mcdonald's ceo is out. we have a brit replacing him. maybe they will put a scone on the menu. ♪

>> welcome back. you are watching "the pulse." we are live from bloomberg's european headquarters in london. u.s. federal reserve has reiterated its pledge to remain patient on raising interest rates. yesterday's federal open market committee statement described u.s. economic expansion as solid, and improvements over the moderate improvements it saw in december. its outlook for job growth was strong. inflation is expected to climb further before rising back to targets of 2% over the medium term.

germany's largest bank has reported a surprise profit. deutsche bank's fourth-quarter net income was 448 million euros compared with a loss in the same period a year earlier. the lender was helped by a decline in provisions for fines and legal settlements. deutsche was the worst-performing large bank stock in 2014. despite the weak runaround, 11 billion euros have been white off the banks of greece. daniele nouy says that the banks will survive the post-election turbulence. >> the greek banks are facing a difficult situation. they are pretty strong. they have a lot of good work being done for their balance sheet during the last years.

i think they will go through this crisis like they went through the previous one. >> let's get back to one of our top corporate stories. fast food is slowing down and donald's. mcdonald's ceo don thompson is leaving the company. "bloomberg businessweek" looks at five numbers that may explain why mcdonald's needs a change. >> time is up for don thompson. having failed to turn around the company's lackluster performance, the mcdonald's ceo will be stepping down in march. here are five of the worst numbers from thompson's tenure that explain why he's out. 13, the number of consecutive months mcdonald's domestic same-store sales didn't increase. in november 2014 alone, sales dropped 4.6%. eight, the number of items

mcdonald's plans to cut from its overly crowded menu in an attempt to speed up service. mcdonald's has already removed some wraps in certain markets. 10 million, mcdonald's wasn't able to sell roughly 10 million pounds of chicken wings it bought for its mighty wings promotion in fall of 2013. the restaurant chain was forced to sell the wings at a discount until supply ran out. $.15, that is the price per chicken nugget during burger king's latest promotion. that is five cents cheaper than a mcnugget. burger king has been challenging mcdonald's as the low-cost leader in fast food. 0.3%, that is the total amount mcdonald's stock has gained during thompson's tenure. compare that to shares of chipotle, which has gained more in the same period.

>> interesting numbers. thompson is out. a brit is taking the helm. here with more on the change is our european business correspondent, caroline hyde. steve easterbrook. he's had a bit of experience in this company. now he's the top man. >> he is. he was chief brand officer, and no he takes the helm. he is not completely mcdonald's institutionalized. he has a little stint with pizza express, very successful u.k. brands. he's always been thinking outside the box. maybe that is something he can inject. patience ran out for don thompson. he only minutely increased the share price over his term. they need to take a bit of a fresh look here. sales down 7% in the last quarter. profit dropping 21%. they've got a lot to do.

they are shuffling the cfo as well. this is all about a brit taking the helm at the american brand. what we see is digital and the menu. >> it is not that burgers aren't selling. we were hearing about shake shack raising their ipo price. it is not as if there is in a market. >> go out to the high street and you see the challenge. you have burger king, shake shack, five guys. it is interesting. they've managed to create this allure that this is homemade better service, healthier even. not healthier. you look at the fat content, it is something like 40 grams for a burger at five guys. it is eight grams at mcdonald's. if you get a big mac it starts edging higher. still, they've cultivated this idea of health. maybe this is what steve easterbrook can do. if he took the battle where it needed to be, back in 2006-2011

he actually took to the television screens and had a debate with the writer of "fast food nation." trying to bat away the criticism. 100% beef, all over their website. they had their own website set up, make up your own mind, to answer questions about this. trying to perhaps remarket themselves. it hasn't worked so far. they need to get more inspirational. >> you wonder whether they need to change the nature of the restaurant. when you walk into certain burger places, it feels like a restaurant. you wonder whether they need to change the experience. >> online ordering or more bespoke menus. thompson tried that in california and australia. i think we are going to see more

to come. they've got to get cooler. they've got to get the millenials. >> when i was a kid going to mcdonald's was a big treat. >> massively. >> caroline, thank you very much indeed. that brings us to our twitter question. we've got a british boss at the head of mcdonald's. what british food could he put in place to make it work at mcdonald's? i've already seen mcscone being tweeted out. any favorites from you? fish and chips is an obvious one. >> maybe a bit of shepherds pie action. >> high action would work. maybe a bit of cornish patty action. >> we've got plenty of that. >> if you want to read more about this mcdonald story, it is the top story on our brand-new " bloomberg business" website. check out the new website and

check out the story as well. coming up, eu foreign ministers are meeting to talk about the challenges that there region faces with russia. could greece force a sanctions showdown? try saying that one quickly. we are going to brussels after the break. daniele nouy -- ♪

>> welcome back. you are watching "the pulse." eu foreign ministers are in brussels today. top of their agenda, new sanctions against russia. my colleague him a ryan chilcote, is in brussels for us. what can we expect today? >> that is the big question guy. one thing that a lot of the foreign ministers would like to do is impose new sanctions against russia. they are looking at new economic sanctions focused on the defense sector, the energy sector, and the banking sector taking what they have done economically a step further. they would like to expand the so-called blacklist of individuals subject to travel bans and asset freezes. there's another thing they can do, which is to roll over some of the existing sanctions.

when they impose sanctions, they last for six months, then they have to be renewed. the decision to renew them has to be unanimous. the ones they imposed back in march of last year following the annexation of crimea are up for renewal this march. one of the things we have heard is they would like to roll those sanctions over in advance. there are some people in brussels that think it is enough to send a signal to the russian president that they mean business. there are many more that think they have to take some kind of action. at least roll over the old sanctions. yesterday, the ambassadors met and failed to agree on that. they kick it up to the foreign ministers who me today. if they fail to agree on it, it goes to the heads of state who together here on february 12. >> how much of a surprise has it been that greece is taking the

line that its taking? >> i think it is a huge surprise. it means an awful lot. maybe not just for the sanctions, but for the eu foreign policy in general. just before tuesday, before we got the new greek cabinet, there was a lot of certainty that there would be new sanctions imposed against russia. then the greeks came out and said they don't agree with the statement that came out of the eu on tuesday calling for this emergency meeting. basically expressing their doubts about more sanctions. they complained that they hadn't been consulted, regardless of the fact that they'd only been in power for a few minutes at that point. it has surprised a lot of people and changed the dynamic, certainly the trend that we are seeing, when it comes to sanctions. that is one of the reasons maybe

we don't get a whole lot today. so far, it all comes down to the new greek foreign minister. there's a lot of concern about him in brussels. there's a photo circulating of him with someone that many would describe as a worrisome russian nationalist, a guy who has been championing the idea of russian involvement and occupation of eastern ukraine. they have ties with the russian government. people will be looking, when he speaks today after that foreign ministers meeting, to find out if what they did on tuesday was just rhetoric or if they intend to be the spoilers of eu foreign policy. >> interesting how you play your cards at this point. ryan, thank you very much indeed. ryan chilcote joining us from brussels. ecb board chair daniele nouy

says sanctions are enough. greek investors delivered a different verdict by selling the country's stock and bonds. they are signaling that there is a price to sticking to promises to end austerity and turbulence surrounding russia. is this part of a new plan to push renewed order in europe? a lot of questions still need answers. andrea's joins us now. good morning to you. can we pick up on the russian angle? a lot of people are scratching their heads on how it fits together with the surrounding economy. >> i don't fits -- i don't think it fits directly, but it fits that we are here too, we are the new kids on the block, you have to take notice of us. we are not here just to say yes. i don't think it is a major policy issue for the greek government. most probably, they will change

or they will shout of it but they will change in the end. fundamentally, it is a mistake in position. i think what they seem to be doing is, we have a voice. >> if we are negotiating about greek debt, is that a card i play? >> i don't think so. right now, what the greek government is trying to do is get on the bandwagon, or rather the train, the anti-austerity voices that have been heard around europe. they want basically to bank on this anti-austerity move. in many ways, syriza in greece is a pawn in the war between germany and the rest of, let's say the world when it comes to austerity or no austerity. as we all know, pawns sometimes are sacrificed. >> likely? >> for a pawn to actually become a clean, he has to go to the end

of the board. >> i'm trying to wonder what the end of the board looks like. >> i don't think they know. they bank that people will come to their rescue at the last minute. i'm not sure whether they have understood the risks. it is clear from what we have seen that they do want to say, we want a change. everybody wants a change of policy. no question about it. but the way they go about it is, they say, we are going to jump on this train. we are the new magicians we're going to go to -- >> all this at the same time i'm thinking about greek debt. let's continue with it. the queen on the other side is angela merkel. what is she watching? is she watching the banks? what are the things she is paying attention to?

>> she holds all the financial cards. she knows that the greek financial situation is not exactly rosy. it is not the actual stock market that anyone is watching. banks have lost a lot of value. >> it is the outflows from the banks. >> even the outflows, that is rather a liquidity problem. as long as the ecb says they only have a liquidity problem they would provide the liquidity. what is interesting about the greek banks is the state of the economy. right now, they have about 80 billion of nonperforming loans and about 100 billion of nonperforming exposure. this is a humongous number. even though they are well-capitalized, they cannot do much with 100 billion of nonperforming loans. the new greek government has said -- i haven't heard something in recent days -- that

they are going to cut the loans to the people, stop paying the mortgage is and things like that , which are very bad for the balance sheet of the bank. people are right to be scared about policies going forward. i think the biggest problem when it comes to the greek economy is that if you want the greek economy to go forward, uni political stability and a banking system that works. right now, we have political instability. we have a government but it is still very volatile. and we don't have a banking sector that works area -- that works. the credit channel has been severed completely. thanks are not lending, not because they don't have the money, but because they have 100 billion worth of nonperforming loans. >> if you are the ecb, do you allow greece to continue to issue t-bills?

>> that is a decision that has to be taken on a political front. you cannot be seen to be punishing the new government which was only sworn a couple days ago. we do know they have deadlines at the end of february. there are 30 billion worth of bonds on-q in march. these are bonds owned by the ecb. we do have 30 billion of bonds that were given as a subsidy to the greek banks and accepted by the ecb as collateral. if greece is not in the program if the ecb decides not to roll over, then all these bonds go to the emergency liquidity assistance. we all know that the e.l.a. is not actually ideal. to put all of your --

>> i'm just wondering where the critical point is. i'm trying to understand the dynamics of how the story evolves. is it the banks that we should be focusing on? there has been a severe erosion in the equity holdings, but as you say, it is the ability to continue to function within the liquidity squeeze that seems to be pivotal. am i misreading that? >> back in may 2012, greek banks had 140 billion in the e .l.a. people think in terms of bank runs. it is a bank marathon. people withdrawing money slowly. you are not going to see queues outside atm's. what we are saying now is that all the cards, financial cards, are in the ecb's hands or the german hands.

what we don't know is whether merkel or germany would want to punish the greeks at this stage, or whether they are going to give them six months of breathing space and then see what goes on. the key aspect is whether they are going to allow changes in the program. right now, the program that has been enforced in greece has said that greece has come up with 4.5% of primary surplus to infinity. this is unrealistic by any economic imagination, to have 4.5% primary surplus forever. you want to say immediately you have 3.5% of gdp leeway about 7 billion that you can play with. then, the economy can start. both governments have to give in. right now, we are on a collision

course. >> ok, let's wrap up i thinking about that. if that collision happens, what is the outcome? i was sitting at a hotel the other morning in athens with a german economist who said that he arrived in athens with a 35% chance of an exit but everyone is telling him that number is way too low. >> i don't think that is the narrative of europe, or let's call it, the global order. i think today, the bank of england came out and said, you have to change the austerity. the danger in greece is that germany and europe changes the anti-austerity policies but greece is not part of it. >> what do you mean by that? >> that it is not going to receive the benefits of that change in policy. >> does that mean greece is still in the eurozone? >> greece can still be in the

eurozone, but cyprus is in the eurozone. >> very nice to see you, andreas koutras. remember, you can follow me on twitter. we're going to take a break. ♪

>> for those listening on bloomberg radio, "the first word" is next. for the rest of you, it is the

second hour of "the pulse." we are going to be talking about mcdonald's. which british food should be on the menu? heels? we will take a break. see you in a moment. ♪

>> shell shock. the oil giant says it will cut spending by $15 billion with more to come if needed. greek banks will survive that is the view from the e.c.b. the market seems to be taking its cue. stocks are stabilizing in athens. and mcdonald's promotes u.k. natives as its next c.e.o. >> good morning to our viewers in europe. a very warm welcome to those of you just waking up in the united states. this is "the pulse."

we're live from bloomberg's european headquarters in london. so, greek banks will survive the current market turbulence says the e.c.b.'s chief supervisor of euro-area banks. they they lost a billion dollars in the first three trading days of the week. they're stabilizing a little bit this morning. daniel noy spoke to hans nichols, and he joins us now from frankfurt. what was the take? >> well, her take was that they're going through a period of difficulty. of course, she's the regulator. she can't talk them down. she did acknowledge they're having a difficult time. but she also said their balance sheet guy is in a much better position than it was before or immediately after the financial crisis. they've done a lot of work to restore it. listen to how she put it. >> the greek banks are facing difficult situation now because of the recent election, but they are pretty strong.

they have a lot of good work being done to their balance sheet during the last year, so i think the crisis like the previous one. >> do you think they need to do more to strengthen their balance sheet given some of the out flows we've seen? >> they need to manage in a conservative fashion their liquidity position. that's the main focus right now and they are doing it, no doubt about that. >> so you're not concerned. >> i'm following them during the situation. that is not exactly usual. >> guy it is not business as usual. yesterday their stocks were down almost 30% this. morning it's climbed back some, and some individual banks up almost double digits. they may be reacting to the comments. we'll be following up on it and watch the banks very closely. guy? >> hans, you talked about the

effects of q.e. what did she have to say on that subject? >> it's a mixed bag. this is the devil of q.e., that it's going to be competing with banks, especially for those banks that are trying to buy sovereign debt. that's going to affect their profitability. she did say she'll have stronger impact in terms of the corporate, but as these two sort of yin and yang, and she acknowledged it could be a difficult time for the banks as well. have a listen. >> it may have different effects producing more growth and improving the credit quality. for example, it can also have less effects. but as a matter of fact, profitability is a matter of concern for the european banks.

so it is something that we have been following and when we are gone following it the bank. >> profitability is a concern for these banks, guy. i think that's a bit of an understatement. of course, this morning we saw deutsche bank surprise to the upside, so it's not all bad news from frankfurt, but clearly this new regulator is starting to put her stamp on things. she's starting to shape things and we'll have a little more news here in a little bit later on in the morning about something else she's planning. guy? >> yeah, looking forward to hearing all about that. danielenouy providing insight into what is going on. let's get more of a take on this. our next guest has a view on it europe european economist from merrill lynch. daniele nouy thinks they will survive. >> that's basically all of them. >> she wants to survive, they're going survive.

>> not if she wants, if the government can. on the other side of the chinese wall dividing the e.c.b. wants it, but it's that simple in the sense that this is probably slightly smaller, not slightly, but it seems to be smaller than what we had in december. the figure finally came up. if we go down the road from increasing pressure, the next stop is to stop pushing. that is the sovereign decision by the european central bank. >> are we going to get there, you think? >> i guess that everyone -- we're in the first days after a major political change in greece and everyone -- no one wants to come down right now. clearly the new government is starting very strongly with very strong messages. the europeans are responding with some fairly strong messages at least the possibility that we use those

weapons probably has to be on the table. >> they are up massively again. the greek bond markets, how accurate a reflection is that of the stress you think this country is under? >> i think there's stress. we're all dealing with governments that have been vague to say the least on how it would handle debt, which has sent some very different signals on the relationship which i sense an interesting message yesterday about how it would position itself in the relationship with russia, which adds to the complexity. there should be stress. there should be stress. it's potentially a very new situation, and the difference between what we had in 2011 and 2012 is this time the europeans probably feel in general we can cope much more easily with very strong pressure on greece. >> that was my next question.

you're starting to see a little bit of seepage into the other peripheral markets. >> it started very slowly. i would say when the e.c.b. has a question, would greece make you postpone q.e. and they were responding well. we take greece into account when deciding on q.e., thank god they actually moved with q.e. before we got the results of the election. without q.e. the kind of movement we've seen on the last day would have been much bigger and much more stressful. i think the belief that q.e. will in any case insulate the rest of the periphery from greece is very strong, but the market probably still needs to understand exactly how q.e. is going to take place, and this is taking some time actually. >> without q.e. peripheral bonds. >> my answer is this, would

q.e. create a bubble in europe? the answer is yes, because q.e. is on purpose creating this defining and taking prices to a level that is not commensurate with actual risks and this is what the fed did, the u.s. this is what the u.k.d. and europe is doing it. there is no other option sadly. the whole issue there is how fast we can expect the sentimental catchup with the prices, but the first impact is the bubble. >> the e.c.b. is doing q.e. to get inflation back to mandate. but listening to what we've been talking about, you can also see they're doing it because of some risk to the eurozone as well. is that going too far? >> no, i think there's a continuum between fighting

deflation and ensuring that it's in europe. before q.e. was announced before it was in the pipeline, my fear about europe was that even if we had had a very nice and steep decline in nominal interest rates this was still not commensurate with the drop in expectations and the drop in potential growth in this country. so you have basically two options, either you wait until potential growth catches up or you artificially purposefully put real interest rates where real g.d.p. is, and this is what q.e. is doing. but to me it's a continuum. deflation was in any case creating questions on this stability in some other countries. one of the examples is others. so when you lone q.e., it's the best protection against deflation. it's also the best protection against the consequence of

deflation on sovereign positions, which is that the question. >> how long can q.e. carry on doing -- if you had seen that inflation is -- they will carry on doing it until inflation gets back to target, it's the sustainability question that remains, if the direction is between inflation coming back and the ability ofity three pay its bills, kind of which one is more critical? >> if the e.c.b. considers that there is no longer any deflation threat and that the regime is back, that's basically across the eurozone, then italy becomes sustainable as well, because it will meet. but in the meantime, countries will have improved from real growth point of view so the crush can be removed. >> but you have a little bit of low inflation environment

which is sufficient to get the e.c.b. to stop q.e. because the pressure comes before we get back to 2% as long as we're on the momentum. and at that point we end up in a situation where italy's growth is still not strong enough to provide enough of a support but any rate still goes back up. >> in my view, it would be very hard to image in a configuration where big european countries have not resolved the position enough to start re-creating the pressure on underlying inflation. there's normally a relationship between the two. for me the issue lies more in the dynamic, which is i think that things are improving thanks to declining oil prices. so we're seeing some responses, but some reforms being implemented, and i think that q.e. actually helps

implementing those reforms. but we are dealing at the same time with a legacy of seven years of recession also growth on the stability of some of these countries. for me, the issue is whether or not germany by the summer of 2016 when we probably need another helping of q.e. will accept that the e.c.b. continues at the same time it's not just in greece, but also in spain, is at odds with any kind of real macro adjustment. >> i have to say i was in the square on sunday night and there were a lot of supporters there, and they were certainly shouting their voices very, very loudly. stay with us. we'll talk about that when we come back. what else is on our radar this thursday morning? alibaba set to report earnings later today. estimates by bloomberg suggest a 6.8% rise in q-4 net income. it's china's largest e-commerce

company. investors will look for clues about its mobile business and its response to government allegations that it sent doing enough to combat online fraud. new sanctions are being considered against russia. the meeting comes after the worst violence between rebels and troops since a truce was agreed to in september. interesting from greece, its new government has questions about sanctions. and mcdonald's ain't loving it. it's the worst slump we've seen in over a decade, and its c.e.o. is paying the price. he'll leave in march after three years in the role. and that brings us very nicely to our twitter question. we've had a few responses, nice ones already. what british food would work on a mcdonald's menu? join the conversation mchaggis. that's the latest one coming through. that sounds like something that

would work well north of the border. plus, still ahead -- shell's fourth quarter earnings, what impact does it have on the balance sheets? we'll hear from the company's c.e.o. note ♪

>> good morning. welcome back. you are watching "the pulse."

shell was the first major oil producer to post earnings since crude prices really came under pressure. bloomberg spokes to the c.e.o. about the earnings miss that his firm delivered. >> in the fourth quarter the lower oil price, sharply lower oil price coming through, particular until our upstream earnings. our down stream earnings were pretty strong. if i look at the year in totality we had a pretty strong year, a year in which we delivered what we said we would do. so much stronger underlying performance in general and much improved financial performance more capital discipline. we completed a program a year earlier, and we delivered some very significant projects through the year that are still ramping up. so you think we are entering a period of uncertainty and volatility here but we are entering that with a much stronger position than we were the year before. >> and though your capital was front, and you're going to cut

capital expend tears by $15 billion over the next three years, what projects are going to be affected by this? >> it's a range of projects here mark. when we looked at what is going to happen in the next few years, of course, we are not immune to lower oil prices, so we see pressure on our investment program. we see, first of all it's an opportunity to take our costs from the supply chain. we will be working hard to reduce our capital costs per project given by the opportunities that we currently see as well. but at the same time, we felt we needed to cap the investment levels at no higher than what we had last year. so we have the third of $15 billion worth of projects over the next three years. that's been about 40 projects. we are now at an investment level that, first of all, we know we can come down further if the oil price outlook warns that. but at the same time, this of course, is also a period where we have to preserve our

mid-term growth. so in my mind, it is a game of being very, very prudent with the current outlook, but at the same time, also not being overreacting to the low oil prices that we see. we need to preserve our mid-term growth. >> the c.e.o. of shell speaking to us earlier on. cutting spending in reaction to the lower oil price. that lower oil price particularly good news to europe right now. let's get a quick thought here. shell, can you give us a sense of this as you plug in the lower oil prices and plug it in for a little bit longer than we thought, what impact it's going to have. >> the end of the vendor we're talking about an impact of 2.3% on g.d.p., so it's significant. i think that the e.c.b. will be able to stop saying that q.e. is working, not necessarily because it is working, but because the drop in oil prices

-- >> it will start -- >> it will start actually not necessarily in inflation, but on growth. it will be able to claim the p.m.i. is improving, consumers are spending data simply because of mechanical impact on power. in q-3 last year, the area was just about the drop in inflation. obviously in deflation you have to be prudent, and it's true that it actually generates income and lots of it is being saved, but some of it will find its way to spending. >> in a year's time, it's stable and will work its way through on inflation, but my guess is the e.c.b. will look at the second and whether or not as a reaction to lower oil prices and lower headline inflation we have the slowdown in wages. >> that's unnerving at the moment. >> no, it's basically a company's response by telling

their employees, guys you're seeing a very nice increase in your real income let's not do anything on nominal wages, and that would be the sign that deflation is becoming entrenched. >> thank you very much for stopping by. the chief european economist of bank of america merrill lynch. coming up -- fast food slows down for mcdonald's, so the company is promoting a brit to super size its sales. will it work? we'll talk about it when we come back. ♪

>> good morning. welcome back. you're watching "the pulse." we're live on bloomberg tv, streaming on your ipad, and we're obviously on the all-new bloomberg.com. go check it out. a fast food slowdown, at mcdonald has led to a reshuffle at the top of the chain. as of march 1 the c.e.o. is out. a brit is taking the helm of this american fast food giant. here with more on the changes at the top is our european business correspondent, caroline hyde. steve easterbrook is on the menu. >> he's the man at the top now, and he's going to be rejuvenating that menu, we understand perhaps adding digital elements. this is someone who they hope will stop the bleeding, because it's been going on for a while. we've seen three years don thompson was at the top. for 25 years he served there. just under the three-year tenure, he managed to not move the share price at all. meanwhile, the rest of the

market in the united states, shares were up about 33%. that is what he's combating. clearly he was unable to inject any sort of appetite. mcdonald's sales down 7% in the last quarter. profit down 21%. now wee got a man who's got experience outside of mcdonald's as well. he's been there since 1993, but he took a couple of years sabbatical it would seem while taking roles at other very successful chains. and while he was leading the london charge for mcdonald's, he really did start to impress. he started to try to tailor menus to some people. he was talking about their digital presence. in europe he actually invested in new food ordering technology so a step ahead of the game. and he started to tackle perhaps the p.r. issue for mcdonald's. you look on the high street, the challengesare clear. not only do you have burger king nowadays, but you've got sushi, mexican coming out of

every single shop floor, and these things are deemed healthier. and they're deemed perhaps a little bit more funky to go in. some of them have a bit more cool factor. how do we win the millennials over to mcdonald's? that is what they've got to be thinking to themselves. how do you convince them it's healthy? that's been the key factor. i actually looked on the website for mcdonald's. for general hamburger, eight grams of fat. five guys, which is doing a roaring success, far funkier place to go in and get a burger they're about 40 grams of fat. >> somebody pointed out, are they comparable? >> if you're going up to the biggest mcdonald's that they offer, i think it's something called the big tasty or something on those lines, the whopper sort of version that's still about 43. that's measurable in terms of grs. times to change things up, i thk. >> caroline, thank you very much indeed. what a big burger looks like. i can believe that of course. what would you add on a british menu for mcdonald's?

now we have a brit in charge. mchaggis, some people have suggested, or the mcspam burger. join the conversation. ♪

>> you are watching "the pulse." a bit of breaking news as we been playing out the comments we've had from the ecb supervisor throughout the morning, we have a list of other headlines that are interesting because it is going have a big impact on european banks ability to pay dividends. our international correspondent hans nichols did interview and has been tracking the story. let's go to frankfort. policy in the firing line.

>> this is the first of recommendations from a few starts to regulate the bigger up in banks and even the best capitalized european banks are going to need to be moderate and conservative with their dividend payouts. this is part of a recommendation. the bank said that this moaning. recommendations on -- from the ecb on their new dividend policy. there will also -- she is also making some recommendations about potential bonuses. this may also raise some eyebrows when you're looking at just what these banks are going to be paying for bonuses. let's have a listen to how she talked about dividend policy when we spoke with her yesterday . >> my personal view on this is putting much common sense for the bank fully compliant with the requirements the, the end of

the period. they have to be conservative because there is no certainty to be able to cover the requirements even in adverse difficult financial conditions. complaint with the -- fully compliant with the requirement. and for the banks in between they need to be compliant with the current requirements, but of not totally reached full compliance. they had to do part of the trajectory, with the profits and

of 2014. >> there will be scrutinizing bonuses. they will be looking at dividend payouts. just remember, deutsche bank reported and they're going to continue with that $.75 per share dividend payout. we will run these numbers through and see how deutsche bank might fare. interesting comments i suspect the banks will be reacting to route the morning. >> at the moment, i'm not seeing any reaction in the banks stocks, which is interesting. that is largely due to the fact the outflow doesn't look quite so bad in greece and the fact which bank is trading up quest wrongly this morning. nevertheless, you're not getting that big reaction. it doesn't seem to be affected by the headlines. maybe not the reaction that you thought you would have got. we will wait for it to seep out a little bit more, maybe. is there a sense people will see this coming?

>> well no. in some ways, yes, there are numerals that the ecb -- there are numerals at the ecb. this is the first major one they put out. maybe the idea that will be more regulation isn't necessarily surprise come up but the actual shape and contours of those regulations -- they have been kept pretty well under wraps. our team in frankfurt has been trying to seek them out and today they got one. >> thank you very much ,indeed. the banks are big theme running through the markets. they have been over the last few days as particular attention is paid to what has been happening in greece. what does today look like? let's find out with jonathan ferro. >> a busy morning. money supply data a little bit better than expected. quite a conditions office adjusting -- credit conditions also a bit better. positive territory in italy. the dax stay positive.

the ftse is down. i will show you why. have a look at some of the majors. shell out with earnings this morning missed estimates. a big cut to spending. $15 billion over three years. shell is lower by 4%. the big headline in the european equity market has been in athens. taking a real pounding. up a little bit today by 2.7%. the banks down by almost 27% yesterday. the bond market same theme, yields higher. i can tell you the yield of the three-year yesterday, at one point them a jump of 300 basis points. huge. the official sector, the imf, ecb, europe, about 81% of greek debt.

the signal in the bond market was surging bond yields, not sincerely about imminent default , but their ability to regain access to markets. the nervousness around the new administration in greece clearly reflected in greek assets. dollar-ruble, there we go again, stronger dollar, weaker ruble. finance or foreign ministers meet today to discuss more sanctions on russia. will they count greece's voice more significant? a weaker ruble ahead of that meeting. >> thank you very much indeed. 24 minutes until "surveillance" in new york. tom, we have a brit running mcdonald's. people over here are talking about mcspan fritters. >> i have to say, i miss jon ferro. we bonded in davos.

i think the data check was really good. i know the two-year chairman yield is indicative of what we're seeing, the fed meeting. you so oil come down. yields across the board. we have the economist of the moment from morgan stanley, has really staked out the territory of saying janet yellen will be forced to wait, patients well into 2016. she will join us in the 7:00 hour with an opposing deal. neil daughter will join us. aggressively more optimistic. i think it sets up a great conversation on "bloomberg surveillance." one of the experts on mcdonald's at the top of the show, and we will look to the new ceo, the british ceo. we will get her terrific perspective on how chipotle has

taken over the business. we're thrilled to have her with us. david from will join us on politics. it is a loaded show. >> thank you very much. coming up, more cash than growth. mark zuckerberg. the story behind the mobile strategy and how the company will find growth in the tech sector. stay with us for that conversation up next. ♪

>> good morning, welcome back. you are watching "the pulse." amazon is pushing into corporate technology, launching an e-mail and calendar service for professionals dubbed work mail. competing with microsoft outlaw -- outlook. mark zuckerberg is spending for opportunities in mobile. here's what he had to say about progress so far. >> 2014 was also a year of big investments in our future. this year we made big bets in the next generation of communication and computing platforms by acquiring whatsupp. raising quality, improving the

performance and efficiency of our mobile apps. >> mark zuckerberg. sony has announced a partnership with spotify to create playstation music. the new service will be available on sony's playstation games console and smartphones and tablets. the company is closing down its own music service sony unlimited. how is the k getting on? -- how is the u.k. getting on? the nation of angels, the name of the largest study on impact of business angels in the u.k. to date. we're joined now by the chairman of angel. caroline hyde is also here. we should probably also mention that. good morning. you have invested in a whole load of companies. that's great. we will talk about that. in the survey angel investing

has become a bigger and bigger theme in the tech sector here in the u.k. and backed up by some really phenomenal tax incentives. can you give us a sense of whether are not great texans and tips been greater levels of investment? >> from everything we've seen from the survey, and it looked to 400 investors and asked them detailed questions about their investment appetites, how much they are investing, and details about tax incentives they're taking advantage of. one of the overwhelming pieces of information i came out was just how much they're working with the enterprise investment scheme in the seed enterprise investment scheme. 90% of all of the investors were taking advantage of those schemes. >> that is huge. a the problem is, the people that know, no, and take advantage of them. the people that don't know well, there are lots of those out there. >> that's right. i think the government has been trying to do what it can to raise the profile of eis and sei s and also venture capital

trust. these are sort of the pillars of the government support for sme's , small businesses. it is trying to raise the profile of them. the more angels they get involved the more people are finding out about it. >> give us a sense of how does this "protect" your investment or incentivize you to put your money in? what is the upside? >> the upside is around taking risk protection, so protection against the downside. some of it will be about making the cost of the investment cheaper by giving you tax reliefs on making this investments, and then there is also relief against the upside. there is no capital gains tax to pay on these things. for companies that are high risk, you are lowering the risk of those investments that you have the potentials to make very

significant gains. and that is really attractive. >> who has been learned in. -- lured in? >> it used to be particularly focused on high net worth individuals. what we're finding is things have changed. from the report we're noticing more women are getting involved in this kind of investing. we are seeing the age bracket involved is also getting younger. >> that means less high net worth, the more moderate net worth. >> i think it is becoming more mainstream. one of the great things about it, it is been around for about 18 years now, so this has survived labor and the tories and all sorts of different governments coming in, tweaking with it, but finally keeping at the same, and investors love that. they love stability. and entrepreneurs love it, too. >> when you're looking at investing -- investments and investors to partner with, how

is that changing as well? what are you seeing outside the survey and in terms of the investment strategy and how that is been reformulated and getting to work that are? >> a venture capital fund investing in hybrid companies what we're seeing -- high-grade companies, what we're seeing is an up session with talent. not just focusing on the talents, but almost disregarding the sector and saying it is the people we are backing. and do they have the potential and the skills to grow this business and to be really big to be worth 100 million or more? >> you're almost not worried about with the product is, you are assuming these groups of taliban be bought by another company or hoping they can change the business up and up that eventually whatever capacity, it will thrive and want to be what we hope is the unicorn and create billions care and u.k. >> everything counts when you're

trying to make an investment. the business model is really important. the team is really important. we are finding you can have an absolutely a-grade team working on a b product. you cannot have it the other way around. that must certainly won't give at the potential it has. >> we assume the businesses you have invested in. -- we have seen the businesses you have invested in. what is working for you guys right now? what stands out as a business? >> we've seen companies like secret escapes one of the fastest growing travel companies around. what you see with y-plan, swift key which is another one, text production about 200 million devices now. these kind of companies, when you look at and say, what made us make that decision to invest in them?

it was all about those people. >> y-plan is an interesting one. it pivoted. they've changed the business model. is that out and out trust in the business team that you throw any of the situation just as the company is reorienting itself entirely? >> one of the key things about a good company and the great company, is the ability to tweak, pivot, and adapt the business model as they find out information. an old style of angel investing was to get the company to commit to a plan for some the stick to that plan despite overwhelming evidence there should be a new plan. we like the fact our companies pivot and we like the fact the iterate as the business grows. >> the world changes quickly as well. nice to see. thank you for stopping by george whitehead, chairman of the angel go find. we will carry on the mcdonald's

question in a few minutes time. you details what you think -- you need to tell us what you think. also coming up, the latest on twitter. what also forgot coming up? we're going to tell you about a unique employee perk at e-commerce giant ali baba. yes, they're taking single data to hold and level. that is coming up in a few minutes time on "the pulse." you can join us on twitter. francine is not back until monday, but sent her a tweet. we will see you in a couple of minutes. ♪

>> google and facebook may offer perks like food and ping-pong tables, but it alibaba, you can find your future spouse. what it is like to work for this chinese e-commerce giant. >> when you enter ali baba's headquarters it is a lot like stepping into any tech campus in silicon valley. inside, there's a starbucks to fuel all nighters. yoga classes and free cafeterias -- three cafeterias.

the perks don't stop there. alibaba takes it one step further, helping employees to find love, marriage, and even to start families. it may look like any other tech company of the culture is unique. employees refer to each other as ali people. many assume nicknames taken from kung fu novels. >> one of the big influences was an author who was a martial arts novelist. in the early days, as the restarting, people took on nicknames of different characters that were in these martial arts novels. >> that fighting spirit has attracted young people to work at alibaba. the average employee is just 30 years old, starting salary of nearly $33,000 year. that is more than seven times the average urban chinese worker. >> attract young chinese at the

top of their field because it is an exciting corporate culture. people feel they can break down barriers and you knew cool, innovative types of things in the worklife. >> jack markell is unlike any tech company founder -- jack ma is unlike any tech comedy founder. from serenading employees to playing matchmaker. a hardship dating board between the gym cafeteria is filled with photos and phone numbers of single employees looking to find their match -- right on campus. >> jack ma is so revealed, that every day, mary's dozens of that hundreds of ali baba employees. now babies born to ali baba employees. >> those new ali families can get an interest-free loan for a down payment on their first home. over the years, ali baba has also given birth to a whole new generation of chinese internet

companies. former employees have helped start more than 145 new businesses. >> they have attractive people that believe they could do something different. individuals who are dreamers and felt they could change the chinese economy through alibaba. >> this kohl's -- closed it culture is part of ali baba identity and keeping it on the family's help the company glow into a global our house. more than facebook and now who employees combined. -- yahoo! employees combined. >> somebody has to do a genetic study on that. in the meantime, ali baba austria's numbers are out a little bit later today. -- ali baba's numbers are out a little bit later today. what are we going to get? >> it will be the first set of figures that ali baba is reporting after they went

public. in terms of net income figures, analysts are expecting 6.8 percent growth. 50% of growth expected, not bad. still, compares to the 60% to 80% growth we've seen in the past. probably going forward, a slower growth is going to become the new norm at alibaba. in terms of what to look for, any state change in terms of yahoo!, softbank, or even jazzma would be interesting. specifically, the finance arm and financial executive vice chairman has hinted that they want to list this unit of the company. so any hint on where they're going to list and how they're going to do it is worth watching out for. >> thank you very much indeed. looking forward to the conversation a little but later.

alibaba cofounder will be joining us later today. that is something you'll want to be paying attention to. great comments on mcdonald's. we will see you tomorrow. ♪

>> it was not a boring fed meeting. america confronts further disinflation. the menu will change, the mcdonald's chief executive officer retires.

is the number two value mail next? sponge out of water. we know where brendan greeley will be next, spongebob hits the theaters nationwide. good morning, this is "bloomberg surveillance." we're live from our world headquarters in new york. it is thursday, january 29. i am tom keene with olivia sterns and brendan greeley. top headlines. >> foreign ministers from the european ministry. russia says the government and key have and only stop the violence by starting negotiations. fierce fighting continuing in eastern ukraine. the united nations estimates the unrest has now killed more than 5000 people. gains for the u.s. dollar as the federal open market committee continued its promise to be "patient" on the pace of future rate gains. noting global risk and