guy: germany's business blues. will will bring you the eurozone manufacturing data next. francine: tsipras on the sidelines of a european immigration summit. guy: and, it could be the biggest libor fine yet. deutsche bank may pay two point -- $2 billion to settle a probe with the u.s. and u.k. welcome to "the pulse." we are here in london. i'm guy johnson. francine: and i'm francine

lacqua. we are getting breaking news from the eurozone. pmi figures coming in below estimates. euro area manufacturing pmi falls to 51.9. it is not surprising. we had not only a weak but a weak german number had an impact on this eurozone manufacturing pmi. guy: it was interesting listening to the minutes out of the bank of england yesterday, suggesting that the slowdown in the state is temporary. may some evidence beginning to emerge that this very early recovery in the eurozone is starting to falter a little bit. francine: euro-dollar, 1.06. you can see the drop. that is when the german figure came out. the european central bank emergency funding for greek banks. this comes ahead of a meeting today between alexis tsipras and

angela merkel on the sidelines of this european immigration summit. reports of a softening stance from the eurozone on reforms is what we in -- what we've been hearing. hans nichols joins us from berlin. nikos joins us from athens. hans, what does the ecb limit tell us about outflows? hans: outflows the last week have been 1.5 billion euros. ela is now 75.5 billion euros. they have a about a 3 billion buffer. that is the buffer they'd like to keep for the banks. when you look at where you lay was in mid to early february -- where ela was in mid to early february, greek outflows have been around 15 billion euros. that is going to have any effect on the economy. yesterday, indices were up. some optimism that you get closer to a deal.

you had been walk or, the central banker -- benoit couere, the central banker. here is what he said. we had eu officials in berlin saying that april deadline for talks is going to be blown. it may be in may or so. we still have that to figure out. we have this meeting between angela merkel and alexis tsipras. guy: hans, we heard from her call yesterday. praying for spain and portugal. somebody missing from the list, greece. hans: it was conspicuous in its absence. she had clear words of praise. she said, some nations have gone through very tough programs earned a bit of breathing space. i'm thinking of spain. i'm thinking of portugal. we can go on now to say that ireland is the growth engine of europe.

that is from chancellor merkel. nothing positive about greece. francine: nikos, this is the five-year anniversary of when greece first asked for a bailout. what is next? the eurogroup meeting, tsipras is meeting with angela merkel today, what are we going to look at? nikos: officials from credit institutions report incremental progress in negotiations between the two sides. that is not enough for the disbursement of bailout funds which will save greece from a potential default in the next few weeks. greece's prime minister is in brussels today. he may meet the german chancellor angela merkel at the

summit. the euro area finance ministers meet tomorrow. we don't expect any concrete decisions from these meetings, just renewed calls for greece to comply with its bailout commitments. the greeks now pin their hopes on an extra ordinary eurogroup conference or the next scheduled meeting on the 11th of may for bailout funds. guy: talk to me about where we are in the negotiations. the technical talks versus the heads of state talks area -- talks. they seem to have been on different tracks. nikos: officials from creditor institutions say that the progress has been incremental, that the atmosphere in the talks has improved, but in terms of

substance, there are big differences remaining. politicians are a bit more upbeat. they acknowledge progress. the greek finance minister expects his colleagues to acknowledge this progress tomorrow in the meeting in latvia. that is the best greece can hope for at this stage. a statement from the eurogroup acknowledging that we are moving forward. francine: nikos, thank you so much. guy: we are joined now by gabriel stern. good morning. you have been a longtime follower of the greek situation. what light are we flashing at the moment in terms of how serious the situation is?

gabriel: i think it is a bright orange. it was very interesting, the point you made about the fifth anniversary. how can a crisis go on so long five years? greek debt has never been made sustainable. it is not as if you can write a profile down on paper. you have to have a little support for it. francine: that and i guess the fact that we haven't seen any reforms or tax collections. is that fair? gabriel: i think blame lies on both sides. the fiscal adjustment has been extraordinary. in essence, the underlying problem is that the troy got have always been -- the troika have always been reluctant to make greek debt sustainable.

you take your hand off the throat of greece and you worry about momentum. in a sense, you have to make it sustainable at some point. you can kind of blame syriza to a certain extent but the troika didn't give birth to syriza but they fed the political sentiment that nurtured it. in a sense, they have themselves to blame. guy: what do you make of the volatility we see in greek debt? gabriel: it is extraordinary. if you talk to the holders, there is still the hope of an upside. if you do get portuguese yields you make a time of money. if it doesn't work and greece exits, you are probably down to 11-12. a lot of people are not playing for that 90. they might just say, if greece does get a new agreement, that

could be a big pop and i will sell them. there's all sorts of players. it is not like a couple years ago. they are very smart players. to me, they are taking too much risk. francine: you believe that with every passing day, there's more of a chance that greece defaults and leaves. gabriel: the way i approach it you come up with a price and the probability of an exit is i think getting big enough to make the whole greek government bond overpriced given the risk. i guess that is not the only asset in the world that is overpriced. once you stare into the whites of the eyes of default, you see it right in front of you, and it seems more real. guy: what chance would you a sign? give us some probabilities.

gabriel: i take maybe an 18-month view. to me, it is getting towards 40%. i think you will probably get an agreement but you could easily not. if you do go into capital controls without an agreement, without a clear plan like you had in cyprus, it is going to be very difficult to get out of them. the other, if you do get the agreement, i'm still fairly pessimistic. there isn't a political constituency in greece to implement it. it is not cyprus. cyprus was very painful, huge opposition to capital controls. on the other hand cyprus had a program. they just got rid of a very

extreme so-called communist government. there was huge consensus at the center right. they wanted more structural reforms. implementing the program was extraordinarily smooth. it was credible within weeks. in greece, it is nothing like that. capital controls in cyprus lasted two years. in greece, they could last a short time with an exit, or probably double that at least. francine: thank you so much. 40% chance of greece leaving the eurozone in 18 months. that is the prediction from gabriel sterne. he stays with us. guy: in the meantime, we are going to tell you what is on our radar. facebook saw a 42% rise in first-quarter sales. it could have been as high as 49%.

the social networking giant gets more than half of its income outside the united states. francine: petrobras has reported a $2.1 billion charge related to its recent corruption scandal. petrobras has been all but shut out of bond markets since an investigation began into a decade of a legit kickbacks, bribes, and inflated contracts. guy: in germany, a rail strike continues. the rail drivers union is staging a walkout. the strike may result in the cancellation of two thirds of passenger services and half of freight transport. francine: still ahead, deutsche bank is said to pay 2 billion euros. we are live in frankfurt for the latest on the possible libor settlement. guy: we will look at google's new mobile phone service. francine: and later, what is spoofing? what does it have to do with the

2010 flash crash? we will break it down right here on "the pulse." ♪

francine: welcome back to "the pulse." we are live on bloomberg tv and radio. guy: deutsche bank may pay a 2 billion euros settlement in a libor probe with the u.k. and

the u.s. let's get over to shane strowmatt in frankfurt. how is the 1.5 billion euros cost comparing with the total litigation cost to this company? shane: the cost they announced last night, about 1.5 billion euros. they only said at the end of last year the provisions for total legal costs is about 3.2 billion euros. neither of the figures have been broken down. several different investigations are open at the same time. investigations into fx dealing asset-backed securitiesk and a legit u.s. sanctions. we've heard a libor settlement could come early. nobody knows what that 1.5 billion euros will be for. we don't know exactly what they provisioned for. it is difficult to compare. francine: what do analysts and

investors think about this? is it fair? are we going to see more settlements like this? shane: we've seen a lot of libor settlements in the past. deutsche bank will probably be the largest so far. the largest to date was ubs with $1.5 billion. we've heard that deutsche bank would come in around 2 billion euros. analysts and investors aren't really concerned about the some. they just want to get this out of the way. particularly in the context of the strategic review they are going through right now. guy: in terms of the timing of the libor settlement we got a strategy review this bank is conducting at the moment. will it feed back into that strategy?

shane: basically, the idea is just to get this out of the way. the management has this hanging over them. we have heard that the supervisory board will be meeting to renew -- to review the strategic options. management can say, we have this settlement done and over with, let's concentrate on the future. they also came out last night and said along with the litigation cost they expect they also said despite the litigation cost, they will be profitable in the first quarter and they are expecting near record revenue. if they get libor out of the way , get supervisory board approval and put down excellent first-quarter results it could look very different. francine: shane strowmatt there in frankfurt with the very latest on deutsche bank. guy: let's change direction and

talk about the u.k. we are back with gabriel sterne, editor at oxford economics. the view over the last few days seems to have shifted. we are now heading toward some sort of labor-led administration. mixed views from the business community. if you look at the economic plans of both parties, i'm not sure there's a huge difference in them. are we getting overly exercised about the differences that exist and whether or not labor is going to be a disaster for the economy? gabriel: i think we are. you put it very nicely. we run our plans for the economic models. it is not surprising that the conservative plans probably mean lower debt in the end and slightly lower bond yields. on the other hand, the liberal and labor plans mean better

output. they are more expansionary. markets probably are just focusing on the fluffy stuff that they don't like about distribution. what is more important is what it does for the economy. it is not obvious that having expansionary fiscal policy at the moment is a bad thing. i think two years down the line, when the annoying tax increases the overall fiscal stance is fairly plausible. francine: not much difference is what you are saying? how do you play it? do you sit still until you understand the agreements? gabriel: if you take equity prices, before the last election, they hit a rocky bit in advance, and then the coalition came in and it turned out fine. i think basically the british

institutions are fine. we are not talking anything extreme. i guess the one thing that markets would worry about is perhaps a possibility of a euro referendum. that now seems very remote as well. you need a tory majority or an alliance with ukip. it doesn't seem likely. guy: why haven't i heard about -- [indiscernible] you have the productivity story. the feedthrough from changing that one number would be enormous. gabriel: you have heard bits and pieces. yesterday or the day before there was a speech on this. i guess one of the things is it is probably ambitious to think you can do too much. you have low productivity in the sense of a global phenomenon.

i guess what you need is for investment to pick up or people to stop getting jobs shifting from finance to lower productivity areas. there's only so much the politicians can do. francine: gabriel, thank you so much. guy: just don't tell them that. coming up, novartis beats estimates. we break down the numbers by sales. that is coming up next here on "the pulse." ♪

francine: welcome back. novartis reported profit that beat estimates. for more, let's bring in bloomberg's health reporter. he joins us from geneva. this is a company that's undergone a major transformation. how is that affecting results? >> good morning. a year ago, no artist -- novartis announced a change to the company. they sold the vaccines division title xo smithkline. and they sold the animal health business. they brought in glaxo cancer drugs. kind of a complete reshaping of the country. this quarter is the first taste

we are getting of what that new company is going to look like, the glaxo deal just having been completed in early march. so far, so good. they were ahead of what the market is looking for. what they created is a company slightly smaller on the top line but more profitable on the bottom line. investors like that. guy: sometimes it is nice to report in dollars and sometimes it is not this being the latter. simeon: exactly right. they were up against a u.s. dollar headwind for the full year. they were estimating a 12% hit to their operating income from that. today, they've said it could be a little worse than that. let's see how the rest of the year pans out. francine: bloomberg health

reporter, simeon bennett. guy: coming up, we are going to speak to a company that is going to be offering that to small and medium-sized companies. ♪

francine: welcome back to "the pulse." guy: good morning. here are the bloomberg top stories. francine: a key gauge of chinese manufacturing fell in april. the pmi was at 49.2 a number below 50 indicates contraction. the numbers suggest that efforts to cushion a slowdown have yet to revive factories. guy: the chinese government cleared the way for payment providers to operate in the country by ending the monopoly of union pay.

visa was the biggest gainer on the dow yesterday. mastercard shares had slightly less games. francine: the european central bank has almost doubled an increase in emergency funding for greek banks. the governing council raised the cap on emergency liquidity assets of by about 1.5 billion euros. the move comes ahead of a meeting today between prime minister tsipras and german chancellor merkel on the sidelines of a european union summit. guy: u.k. retail sales for the month of march our way week. really week. we will get you a pound number in just a minute. that sits alongside an expectation that we were seeing some credit origination. anyway, down by 0.5%. the pound is down.

this time yesterday, it rose on the bank of england minutes. we are trading lower today. francine: we are also in the midst of the earnings season of the tech titans of silicon valley. yesterday, we heard from facebook. caroline hyde joins us for more. it seems that the strong dollar had a very big impact on sales. caroline: this is facebook, the company that does most of its business internationally. these falling dollar signs some of the dragging effect that it had on its sales. let's dig into the numbers. for the first time since 2012 and as i mentioned, the strength of the u.s. dollar is what pulled it down, you can see they had 49% growth in sales. that is a phenomenal figure. it was only 42% when you factor in the drag of the u.s. dollar. underlying this business, some

phenomenal statistics. this company is gaining in terms of users and ad sales. we are now up to 1.4 4 billion users per month. every single day, they are getting more addicted. almost one billion people checking in every single day. mobile is where they are at. we are seeing them up in the 50% range because about three quarters of their business is done on mobile. they are becoming a platform for mobile apps. crazy stats in terms of how much they are hiring as well. 48% increase year on year. they now have 10,000 people working for them. underlying its business is one of strength. we saw it do the same for ebay as well the dollar strength hurting sales slightly, but the company managed to outperform. we saw it eat analyst estimates.

-- beat analyst estimates. they did cut 2400 jobs. guy: we are going to hear from google later today. they've confirmed that they are not just a tech company anymore. caroline: you're right. we got a big unveil, the big mobile product. this is the future for google. they want to own our digital life. they are launching mobile project fi. no contract mobile phone service that you can use abroad. no contract, but you do need a nexus 6 google android phone. it starts at just $20. unlimited texting and calls in the u.s. when you are out and about, you

get on sprint and t-mobile networks. this is where it starts to work when you are not tethered to wi-fi. if you want 10 gigabytes of data, you pay $10. it is quite interesting. if you don't use that data, you get refunded the money. when you are abroad you get very cheap calls and wi-fi as well. francine: carolyn, thank you. caroline hyde with the latest on these tech titans. guy: our next guest says small businesses are being failed by banks. he's come up with a solution. we are joined by christoph. good morning. what does the name stand for? >> it stands for intermarket capital. it is the idea that we provide funding to small businesses in

the u.k. we just launched our operations in germany. francine: you've been open for three years now and you had about 5000 businesses. this is innovative. small and medium businesses don't have access to capital. thanks to technology, you allowed to analyze ebay data. you take someone's name and you have their score which means you can make a decision. christoph: that is correct. the decision-making is very fast. we cannot collect on our customers through services like ebay. traders on ebay -- they are really helpful in understanding their business. guy: you've been doing it for how long? christoph: three years. guy: how do the loans you've

made stack up? what is the track record? christoph: our technology really enabled us to understand who are the good customers and who we should be providing funding to. guy: ok. how many loans do you turn down for every loan that you make? christoph: that really depends on our customers. currently, we can accept nearly 70% of them. francine: the way this is funded is basically money that you raised through family offices and a number of other channels area -- channels. your backers how much of a return are they expecting? christoph: we pay them returns they would expect for the level of risk they are taking. if you look at the marketplaces you have great benchmarks in

terms of how much investors are receiving on these platforms. guy: how does alibaba get involved? christoph: it is a very exciting story for us. we will be financing all of the businesses that are buying from china through alibaba. i think it is a fantastic transaction. they can provide a valuable service to their customers. it is very attractive access to small businesses. francine: what is the threshold? i'm a small business. i'm buying the bulk of my things that i want to sell from alibaba and you provide me financing? do i have to spend a certain amount? it is a great concept. i'm wondering the threshold and whether you can roll that out with people like amazon or other online shopping providers. christoph: i think that's one of

the big benefits that we offer. we provide funding from as little as 1000 pounds. the threshold is really low. some of our merchants are only turning over in the tens of thousands annual revenue. our largest customers would turn over in the low few millions. they would receive larger amounts of funding from us. platforms like ebay, amazon, or alibaba, benefit from the fact that we can cater to the small business. in the u.k., you have 5 million businesses and 95% are companies with less than five employees. guy: how does the u.k. compare with germany and all the other markets you operate in? are there differences, are there similarities? christoph: there are of course

differences between the countries, but speaking of germany 40% of small businesses get rejected for bank funding. after many years of quantitative easing the very small businesses are not enjoying access to funding. that tells you something about the problem. it is not actually capital. capital is there in abundance. it is really about the technology to understand your customer so you can make a decision whether the risk is appropriate. guy: what are the capital requirements? thanks won't lend because of the capital requirements with making a loan. the regulatory requirement requires them to put a lot of capital next to that. you don't have the same requirements, do you? christoph: the regulatory requirements vary from country

to country. in the u.k., we don't have a banking license. we are providing credit, which is not subject to a banking license. ultimately, our equity is -- [indiscernible] francine: one final question. do you want to become someone that rivals santander for example in terms of loan providing or is it going to be more strategic, with more joint ventures like you have with alibaba? christoph: the vision is that we do rival the big banks in the future. the market is vast, 20 billion small businesses. -- 20 million small businesses in europe alone. i think we can become a company

that would be on par with the big banks today. francine: chris, thank you for coming in. chris eirieche, founder of iwoka, thank you. guy: later, we talked to the ceo of erickson. francine: also coming up, amalie chang sits down with the facebook chief operating officer and richard branson for an exclusive conversation. we will have the best of that interview throughout the day tomorrow. ♪

francine: welcome back to "the pulse." guy: brazil's state-controlled oil company has reported a $2.1 billion charge related to corruption scandals. with more on the story, roderigo joins us from madrid. can we expect more? put this in context. >> there's this right down, and they've had other issues with the decline in oil prices. $2.1 billion is not as big as a lot of people were expecting. at least there's a number out there now. this is a key issue for the bonds. they won't be breaching.

the investigation is ongoing. we don't know what else will show up. francine: what is next for petrobras? rodrigo: the biggest issue is that within 30 days, the ceo's will be presenting their new five-year plan. that's has to do with capex. the second issue is their divestment program. they've said they want to sell $13 billion in assets over the next few years. in this market, that may be a struggle. that is the big question everybody has right now. guy: thank you very much indeed rodrigo: joining us from madrid. francine: novartis reported first-quarter profits that beat as the company begins to benefit from asset transactions that

make it smaller and more profitable. guy: google has unveiled its own wireless mobile phone service. it is called project fi. the price plan should put pressure on at&t and verizon with the service offered through sprint and t-mobile in the united states. francine: authorities in chile have issued a red alert after the calbuco volcano erupted. the eruption sent a huge ash cloud. evacuations have been ordered for people living within 10 kilometers of the volcano. guy: navinder sarao, accused of contravening to the flash crash, has been granted bail of 5 million pounds. ryan chilcote joins us from outside his home in the west london suburb. we know he was granted bail. tell us more about the conditions attached. ryan: he's been granted

conditional bail, but it is not clear that he has posted bail just yet. that is one of the reasons you have a second day of the media circus outside his home. a lot of reporters and photographers here to get their very first picture of mr. saao rao, because there are no pictures of him since he was arrested area -- arrested. one of the conditions was that he post a 5 million pound bond. it is not entirely clear that that money got to its destination yesterday. the thinking is that he spent last night in jail and he is on his way here. when he does get here, to give you some more sense of the conditions, he's going to have to spend between 11:00 p.m. and 4:00 a.m. every day at his family home behind me in this

west lust and -- west london suburb. finally, and perhaps most curiously, he has absolutely zero interaction with the internet. the prosecutors demanded that he buy a phone without internet access. that could be a very long while. the first hearings where the judge will consider the united states request to have him extradited there isn't until august. francine: ryan, give us a sense of how people are reacting to the case. we spoke to a lot of people in the city. the sense is he couldn't have done this on his own. ryan: i think there's a sense that he perhaps is a scapegoat. to a certain extent, maybe even a celebrity. if you look on twitter, search by his name, you will discover

all about people say they think he is a fall guy for the so-called flash crash. a lot of people don't think it is possible that a lone trader trading off a computer in his parents' home could have the weight necessary to cause a market collapse where you have $1 trillion worth of stock market value erased. he actually worked at one of those so-called trading arcades right up to about 2008. he was a bit of a rock star. we saw a lot of that in the reporting over the last day. he would go in to the trading office so he would only have to pay a reduced train fare to get there. he waited until 4:00 p.m. to get his sandwich so he could get a half-price deal. what was most exciting for the other traders sharing space with

him at this trading outfit was that he was at the top of his game, pulling in as much as five hundred thousand pounds a day much better than the other traders. people looked at him as a bit of a legend. he left in 2008, but as recently as march of this year, another trader from the firm was talking about him as somebody you want to emulate. he understood risk and he took it on. back to you. guy: ryan, thank you very much indeed. francine: the charges have shed light on little-known trading practices. this one is called spoofing. what does it have to do with the 2010 flash crash? matt levine explains. >> i've heard that a traitor

named navinder sarao was arrested in london. prosecutors say he was spoofing when the s&p 500 index fell by about 6% in a matter of minutes. what is he accused of doing? spoofing involves putting in fake electronic orders on one side of the market to move a price. the spoof or might put in an order to sell above the current market price. other traders will think people are dumping futures and will rush to sell, driving down the price. the seller will never execute and start buying contracts at the new lower price. he can rip the the process in reverse. he will push the price up and let him sell. prosecutors say that on the day of the flash crash sarao did exactly that. they also say that he did this many more times over the five

years since the flash crash. guy: i played spoof in the pub. that was a different game. francine: but the concept is the same? guy: you could say that. francine: happy st. george's day. guy: guy johnson is wearing a red tie. in honor of st. george. we would like to wish everyone in england a happy st. george's day. we are back in two. ♪

francine: welcome back. guy: welcome back. welcome back. for our viewers, it is a second hour of "the pulse." francine: we will be talking to the ceo of ericsson. and of course we will ask him about the latest alcatel deals and whether he is thinking of doing some large acquisitions. guy: shares getting bumped this morning. the margin miss is pretty big today. that chart really tells the story. there was a big gap first thing this morning. the stock is down by 7.8%. we will get a sense of margin development when they are going to start spending some money. what does he think of google? francine: will be interesting to

get his thoughts on that. you can follow us on twitter. "the pulse -- ♪

francine: european stocks fall. raising questions about whether qe is really worth it. guy: angela merkel meets a tsipras. guy:francine: deutsche bank may pay to settle a probe with the u.s. and the u.k. guy: good morning to our viewers in europe. good evening to those in asia. a warm welcome to those waking up in the united states. francine: this is "the pulse."

live from london. guy: in the midst of the earnings season for the tech titans in silicon valley. yesterday we heard from facebook. more on its performance. the strong dollar having an impact. >> not very friendly. down goes the dollar. down go sales. down goes full profitability. the numbers underlying were pretty strong. when you look at the top line most did miss estimates. it was the first time we have seen that for facebook since 2012. it was the dollar strength that seems to have been the weakness overall. more than half of the sales come from outside of the united states. they have been trying to focus on asia and europe. when you are bringing that home turning that into dollars, less bang for your buck.

strip away the dollar and the numbers are looking pretty stellar. sales are up 49% when you strip with a foreign currency issues. users keep on ramping higher. 1.5 billion people around the world look into their facebook account every single month. almost one billion people are checking in every single day for facebook. there is so much content that we want. 4 billion videos per day are watched by facebook. this is why advertisers are coming to facebook. they are targeting us the a mobile. mobile makes of three quarters of their advertising sales. this is a company expanding at a huge rate. they have upped their headcount by almost 50% in a year. francine: before we talk google earnings later, yesterday, they talked about mobile.

caroline: this is interesting. us is google wanting to own our digital life -- this is google wanting to own our digital life. you have a phone service being offered in the united states -- it is low-cost. $20 will buy you unlimited texts , unlimited calls, and internet via wi-fi. you then can link on to sprint, t-mobile networks. wherever the coverage might be better, no matter where you are in the united states. this is quite disruptive -- being able to jump from one network to another. it will put the pressure on the competitors. you have to buy their google nexis 6 -- nexus 6. for the data when you are not using wi-fi, you will pay up -- but pretty little, actually.

one gigabyte of data, $10. any amount that you don't use, you claim the money back at the end of the month. this is really trying to push the envelope a little bit. there are the likes of republic wireless and others allowing you to use wi-fi and get on to other networks in the united states. what is going to be interesting is who uses it in the united states. if you want to use data in the u.k., it will remain on the same tariff. the question is -- what is the commitment of google? it is a little bit of an experiment. an interesting move into mobile. francine: thank you. the very latest on google and these other tech titans. guy: let's talk about the earnings season. the extent to which earnings are keeping up with bankruptcy levels.

good morning, james. >> good morning. i worry about the earnings. whether or not companies will be able to maintain them. a lot of the adverse reactions are not that numbers are shy of adverse reactions, but the statements the companies are making are not bullish about forward prospects. it is quite hard to keep pushing out the quality that the company has in the amount of growth that can be expected. the second issue is the amount to which corporate earnings and america are being magnified. we see the whole leveraging of the u.s. market system and i worry about that. there is the possibility that they are not investing adequately in the long-term growth of the real economy and

that is the cornerstone of their long-term wealth and health. francine: what about currencies? james: the u.s. dollar remains extraordinarily strong. it certainly deserves a breather. is this a translational issue? we are seeing companies doing exceedingly well. in the u.k., they are having a difficult time selling -- that is a much more transactional issue, rather than translational. francine: thank you so much. james stays with us. we have plenty to talk about. guy: we are keeping him for a while. deutsche bank is poised to pay 2 billion euros to settle a probe on interest-rate rigging. talk me through the 1.5 billion euro litigation cost.

>> good morning. deutsche bank said they are predicting 1.5 billion euros in litigation costs for the first quarter. the same goes for their provision. they said they had about 3.2 billion euros for the litigation . we don't know exactly what for. they have a whole plethora of investigations open at the bank currently, including investigations into fx dealing, securities, as well as alleged u.s. sanction violations. we have heard that a settlement with the u.s. and u.k. authorities could come as early as today on libor. most of us are assuming that the first quarter legal cost will be for libor. we are hoping for more clarity with first-quarter results. francine: what do analysts and

investors think about the settlement? >> the expected amount has been growing more and more. we were expecting the settlement to come in around 2 billion euros. even though it has been growing and growing analysts have been saying, let's get this over with and off the table. particularly in the bigger context of deutsche bank, with the strategy review going on and first-quarter results coming next week. guy: they are trying to figure what to do with the bank. they are trying to have a little bit of strategic thinking at the moment. they are in the middle of a strategy review. is it good news that they have finally got a settlement on this one and can maybe put it behind them, rather than having it in front of them? >> exactly. that is the advantage of the timing if it does come today. if they can push this off to the side and get it out of the way and book the supervisory board

we are expecting a supervisory board meeting tomorrow where they can review the strategic options for the company presented by management. if they can say, we have libor out of the way, let's focus on the future, here is our new plan -- it is definitely much better for management. also, looking at next week -- the first quarter results. they said last night along with a 1.5 billion litigation charges they are expecting in the first quarter, they are also expecting a near record level and the bank will be profitable despite the litigation costs. getting this out-of-the-way and going to the supervisory board with a clear head and a new plan is definitely important. francine: thank you so much. we are back with james bevan. when you look at banks, do they look attractive? james: i find banks one of the

most interesting and exciting sectors right now. there are very bearish notes about what the sector represents. the banks fall into four categories. i think there are fantastic u.s. banks. i think goldman sachs is going to be a winner in the investment banking world. people say that banks are going through an extraordinary period of meltdown. those that have remained will really clean up. what is critically different this time around is i would suspect that the goldman benefits -- a lot of the staff remuneration is now in shares. that is a key issue. in europe, i would be looking at domestic names, like lloyd's in the u.k.

they should be able to yield around five percentage points in two years. the third area is the selective exposure to good quality asian banks. a number of the banks in economies such as thailand are now extremely well-placed for the long-term. guy: if the bond market blows up and all of these guys who are holding bonds and have them on their books -- what is that going to mean for the story? james: i don't think that that is disaster. i think the steeper yield curve would be more of a factor. my thesis for being bullish on the banks -- a steepening of the yield curve but definitely not a blowing off of the rates. francine: thank you so much for now. we are back with james bevan shortly. guy: facebook results missing

estimates for the first time since 2012. hit by the strength of the dollar. the social networking giant gets more than half its income outside the united states. francine: petrobras has reported a $2.1 billion charge related to a recent corruption scandal. it is part of their financial results released yesterday. petrobras has been shut out of the bond markets since an investigation began into a decade of a legend kickbacks. guy: the train drivers union is staging a walkout. it may result in the cancellation of two thirds of passenger services for half of freight transport in germany. francine: still to come we will be live in stockholm to speak to the ceo of ericsson after the

company missed expectations in its first-quarter earnings. ♪

guy: welcome back. we are here in london. francine: the european central bank has held emergency funding for greece.

there seems to be reports of softening -- at least according to the greek finance minister. guy: let's get more from hans nichols in berlin. tell us about the new ecb limits and what that tells us about the situation and how it is developing. hans: what the ecb did yesterday is that they increased emergency liquidity assistance up to 75.5 billion euros. that was a 1.5 billion euro increase from the previous week. what they have tried to do is cap the increase -- have the increase match the amount of inflows that have left the greek banking system -- outflows that have left the greek banking system. when we had the first ela increase -- back of the envelope

calculations suggest that you have lost 15 billion in the last two months. there is some positive news. there was some optimism. in recent days, there has been tangible progress in the quality of the discussion. significant differences on substance remain. it is those differences they are going to have to start hashing out. later tomorrow is the big meeting with the euro finance group. the new deadline is technical costs sometime in mid may. that is with the eu commission said earlier today. we have some shifting deadlines, as always. no one knows when they will run out of cash. which is why we go to our man in athens. francine: hans can do the questioning. guy: you don't need us.

what should we be asking marcus? hans: why don't you ask him how much cash is actually left in the greek government coffers? guy: marcus? [laughter] >> i mean we keep saying this. we have been saying it all the time. they are really it's -- really starting to scrape the barrel now. no one has been able to say exactly when they are going to run out. they were having to gather up money from the regional authorities. that provoked a bit of a political reaction internally from the various managing governments. there is nothing they can do about it. it does kind of indicate -- no one really wanted to do this --

it does indicate that they are really having to scrape around now. as always, the question remains. no one knows exactly. the reckoning is coming closer. francine: thank you so much. we talk about greece every day. james we had gabriel stern on. he said 40% chance of a greek exit in 18 months. you strongly disagree. james: i do. absolutely. if you said to me, can i analyze what is going on? the 20th of july is the big day -- after which there are no more accommodations. that is when we have to resolve the greek government bond redemption with the ecb. there is another huge payment in

august, even if we manage to do that. to me, the endgame is not about grexit. it is about a default on the deficit. the cost of servicing the debt rises by the amount which the new currency is devalued. it is a total nonstarter. greece has an enormous amount of work in the five years we have been talking about these problems. it has take wage cost back to the level it was when it joined the single currency, having ballooned by 20%. francine: tax collection. james: of course there are problems. the question is what does one do about the problems? i do worry that the level of debt is inconsistent with the recovery plan. i think there has to be some very grown-up conversation about what is going to happen with the

level of debt that is already there. it is a completely different conversation then if greek should leave the euro -- greece should leave the euro. i think it is highly likely that there will be capital controls. all of that capital fright -- flight from the banking sector. guy: you have parallel currency and currency controls. you have to question at which point you are still a member of the eurozone? james: you don't say, we are going to have another currency. here in london we don't really understand the strength of the europeans in the single currency to the nation. guy: all i hear from berlin is that the germans think that letting greece go would not be a problem. james: the emotional and

political problem for europe is if it is going to start expelling members. i think, equally, if greece leaves it is clearly going to have to have a restructuring of its debt position, for which i mean in terms of the default. what happens to the greek economy? is it going to get access to fresh lending? it is fascinating to me that china lends greece 100 milli -- that china lends greece money last week. i would absolutely expect greece to go back to moscow, beijing, over to america. francine: thank you so much. james: thank you. guy: keep it right here. we will be joined by the ericsson ceo hans vestberg.

how he plans to compete with the larger competition. ♪

francine: welcome back to "the pulse." let's get more on the u.k. we are 14 days away from the u.k. election. how do you trade it? james: i think the equity market

is in contrast. i think the gilt market is at risk. i would be looking at great companies. whoever wins is going to be absolutely committed to having britain at the heavy data transfer end of the market. bt is a winner. guy: buying glencore is irrelevant or something like that. francine: the weakness of the pound depending on who governs because of the hung parliament. james: i think it is going to be a supremely uncertain situation. mr. clegg will end up with about 30 seats. it will be a different period -- difficult period of adjustment. francine: thank you so much. guy: we will get the latest details of the trader accused of contributing to the flash crash

in 2012. you can join us on twitter. ♪

francine: welcome back to "the pulse." i'm francine lacqua. guy: good morning. i'm guy johnson. francine: a key gauge of chinese manufacturing fell to a 12-month low in april. a number below 50 indicates contraction. guy: visa and mastercard shares surged up. visa was the biggest gainer.

mastercard shares made similar gains. francine: the european central bank doubled an increase in emergency funding for greek banks. they raise to the cap on emergency liquidity assistance by about 1.5 billion euros to 75.5 billion euros. guy: let's talk about the markets. what has been going on? we had a relatively flat open on the deposit front. jonathan: the data happened. asian slowdown. pm eyes coming in below -- pmi's coming in below expectation. europe got a real reality check. miss, miss, miss. miss across the board.

the data for the eurozone, the cop as it pmi -- composition pmi , also slipping. equity markets pulling back a little bit, led by the miners -- that is the biggest industry losing group the last time i looked. some money going into bonds. when do you get to say that boone deals -- yields tripled in a week? we come back lower on the german 10-year. a yield of 0.15%. even to just about 12 months ago. if i told you that the german yield would be 0.15%, many

people would have laughed. the reality is there is a lot of work to be done between greece and their creditors still. never mind with the three-year is doing, that is uglier. that tells you what kind of a situation we are in. the european data was week. the u.s. data a little bit later. the u.k. data was weak. a lot of people are looking for growth. you get a plunge. we are off by 0.33%. those u.k. retail numbers or something to think about. guy: they certainly are. thank you very much, indeed. francine: the british trader accused of contributing to the 2010 flash crash has been granted bail at 5 million pounds while he fights extradition to the u.s. guy: ryan chilcote joins us

outside his house. what are the conditions on the bail? ryan: one of the interesting things is that while he has been granted that conditional bail it is not clear that he has posted the bail just yet. let me show you some of the reporters out here waiting for him to post bail so he can surface at his home. it is the second day of the media circus and the second day of the loud aircraft flying overhead. we are waiting for him to post that bail. we heard that he has 5 million pounds in his trading account. we know that he has the money. we don't know whether the court has been able to confirm the transferred funds just yet. one of the reasons we think he is still in jail awaiting his release. when he is release, he will have to come to his family's home

just across the street from the media circus. one of the conditions is that every single evening, he must be in that home where his parents also live, between 11:00 p.m. and 4:00 in the morning. he has to wear an electronic tag , as well. he has had to forfeit his passport. while he is fighting the extradition -- that could be a long time until the first hearing -- he is allowed no interaction with the internet whatsoever. the prosecutor said he had to go out and buy a phone with no internet access on it. guy: talk to me about how the local community is reacting to this and also because of the media circus and also the guys that he used to trade with -- over going to get information

about what this man was like? ryan: here in the community there is a lot of surprise. it sounds like he was a pretty reclusive guy from a good family . you hear this thing a lot. people very shocked that this could happen on their streets, particularly the whole $40 million part. people saying if he made $40 million, why is he still living on our street? among the general public, there is a lot of interest in mr. sarao. there are hashtags about him you can check out. a lot of people are questioning whether one loan day trader operating out of his parents' house could cause a market collapse. before he started using these illegal trading strategies he

was trading at a trading arcade outside of london and he was a bit of a rock star for two reasons. he was known as being a really frugal guy. he would show up late so he did not have to pay the full train fare. he would wait until 4:00 p.m. to get a sandwich so he could get it at half price. frugal on the one hand. in addition to that, really raking it in making sometimes 500,000 pounds in one day, when a lot of the traders were lucky if they clear 500 pounds per day. there were about 25 other day traders operating in the same arcade. they had an awful lot of respect for him. we see the same thing with the rogue trader in france. hugely popular with the public. sometimes the public loses

interest when these things go on for a long time. francine: thank you so much. guy: there are very few people in the phone -- world that still possess a phone without internet. francine: yes. i still have one. it is my third phone. it is the backup of the backup. the charges against sarao have shed light on a little-known trading technique called spoofing. ♪ matt: you may have heard that a trader named navinder singh sarao was arrested in london form and u.s. futures. his spoofing contributed to the may 2010 flash crash. what is he accused of doing? spoofing or layering, involves

putting in fake electronic orders in an effort to move price. a spoofer might put in an order to sell a lot of futures in order to buy them. people will think they are going to dump futures and will rush to sell. he will never execute and will start buying contracts and then he can repeat the process in reverse. pretend he wants to buy a lot of futures and then he can sell a profit. prosecutors say that on the day of the flash crash, he did exactly that netting $800,000 worth of profit in one day. you wonder why it took so long for authorities to catch on, because they say he did it many other times in those five years. francine: coming up next, we speak to the ceo of ericsson hans vestberg. guy: the margin number was a little soft. we will find out what his next

for his business. ♪

francine: welcome back to "the pulse." guy: ericsson missed first-quarter profit estimates. shares are down after those numbers. we are joined by this company's ceo, hans vestberg. investors were caught by surprise by how weak the

numbers were. is this a blip or a trend? hans: what we reported in this quarter was the growth of 13% on the top line. then we have a decline in our operating model by 19%. that was mainly driven by the shift we have in our business. it is more china and the rollout of coverage projects and less about capacity in north america. we are also doing restructuring in the company. that is impacting the figures. even though the currency and exchange rate is very positive for ericsson we are hedging and we had losses on our hedges in the quarter. all in all, that ended up lower. underlying, we still continue to

improve because that is what we are seeking four. francine: basically, the share price is down 10%. do you think this is a little bit too harsh? or is your message saying we know this was a soft quarter but things will improve? hans: it is always hard to judge what the market reaction will be. i think that we are on a track to execute a plan to transform the company. we are doing everything we can to impact the course of that. if you look at the report, we were growing in many regions. asia is growing well. our service business at its best quarter for many years in profitability. the network segment was down in profitability.

the currency changes over time will be much better. we are confident that we are executing well on that. today, investors are interpreting that in a way, but long-term, i'm am confident that we are executing on the right thing. guy: the merger of lucent and alcatel threat? tying up those two businesses is going to save an awful lot of management bandwidth. hans: of course. it is just mind-boggling. with this announcement it is just an enormous change for many players in this industry. i think that everybody is looking for the strategy right now. we are executing on our strategy that we decided on five years ago.

this planned merger indicates that these companies are trading -- changing strategies right now. right now, it does not change our strategy. we are transforming to an i.t. and telecoms company. francine: you don't feel under pressure to do m&a? i guess you have to become vigorous. hans: of course, we always have to see what is happening in the markets. finally, we believe in organic growth. we want to build systems that hang together. it is always difficult to acquire companies. if we can avoid, we are not buying any companies. we would rather deployed investment in our own research and development and service

department. of course sometimes we need to acquire. we acquired one company in china in the first quarter that is geared toward building systems. i have all the respect for the planned merger of gnocchi a -- nokia and alcatel. guy: when is north america going to pick up? do you think that google becoming a telecoms operator is going to significantly change the game in north america? hans: the first question -- i think that we already saw it in the third quarter last year and into the fourth quarter and into the first quarter -- it is a little bit slower and mobile growth and investment in north america for obvious reasons. i have all understanding for that. our position about the change in mobile infrastructure -- we have a very good market share in

north america. it is a lot of competition in the market. a lot of new offerings. usage is going up. i cannot really judge what it means. we see north america being a forefront for new innovation services and 4g. all in all, it is good news that that is happening in north america. i cannot really judge what google's announcement is going to do to impact the market. a lot of things are happening and we have a good market share in north america. francine: i understand that it is early days to speculate how that will change, but for-five years from now, how will the north american market be vastly different and what role will you play? hans: i think that what we see

right now is that any customer in the world is looking at their strategy. everything from connected cars to home surveillance. for the next couple of years, that is going to define it. we are going into a total new world. anything that benefits from being connected will be connected. the challenges are there. it is a new level of competition. we are competing with companies we would never have competed with before because we are going into new areas. that is going to be the same for the north american market and any other market. the competition becomes so huge because you can do with -- do more with mobility and cloud services that you never would have thought of before. guy: how difficult is it to think of what to spend money on and not to spend money on? you say you are going through a

cost-cutting program at the moment. is that on track? are you having to adapt on a daily basis because the market is moving so quickly? how do you adapt on a daily basis with such a fast-moving market? hans: you are absolutely right. it is fast-moving. we are looking at areas where we are the world leaders. we are number one in mobile infrastructure services, telecom services building systems, tv and media. when we are doing the transformation, we can do rationalizations. we are looking at programs that are investing $1.5 billion -- we are calling the plan we have already taken measures in the first quarter. we will take more measures in the second quarter.

our execution to go into new areas based on our core areas. guy: if you are not number one or number two in the market should you be in that market? hans: i think that it depends on how you build your systems. it is about hanging together with the end to end solution. we use the same hardware for all of our software applications. we are scaling in other ways, instead of for each and every product. for our services, we are encapsulating all of that. we are celebrating -- we are selling solutions. that is how we are moving forward. it is very important to be in the lead in the technology-driven market that we are in. francine: thank you so much for joining us today. hans vestberg the ceo of ericsson, joining us from stockholm. guy: more tech earnings.

the eu leaders are meeting once again. all of that coming up after the break. ♪

francine: here is a look at what we are watching for the rest of the day. big tech earnings out in the u.s. here in europe, we are keeping an eye on the german rail strike and the emergency summit on

migration. guy: let's find out how we should be looking at all of those things for the rest of the day. hans nichols is in berlin. hans: with the rail strike, part of the freight and this morning. the passenger strike will and later tonight -- end later tonight. this could have real effects on the german economy. this could be all the way up to one million euros of lost productivity per day. it could be as much as 100 million euros of lost productivity if factories have to shut down. angela merkel's meeting with alexis tsipras will be very important. tsipras appears to say that he thinks they are close. he thinks they are close to a

deal. that is according to a person familiar with the matter. guy: you are not going to let me on the train, are you? hans: no, no. air baltic. i will take my bike to the airport, just to be certain. you can tease me about riding my bike. i will tease you for your posh holidays. [laughter] guy: we are back to greek holidays again, aren't we? the posh holiday. island hopping. i did that. as a kid. francine: hans knows a lot of things. that is why he is such a good investigative, roving reporter. guy: roving to the baltics. that is it for "the pulse." for our u.s. audience, it is "surveillance" next. anna edwards and i will be back shortly.

fran is off. francine: im off. you can still tweet me. we will see you tomorrow. ♪

>> this is "bloomberg surveillance." tom: it is a revenue light earnings season. facebook dazzles. get out the amax.

expenses are off the chart. we give you the nerd book of the summer. this year's word is simple. good morning, everyone. this is "bloomberg surveillance ." i'm tom keene. joining me, the nerd olivia sterns. brendan greeley is off today. let's get some nerd news. olivia: all right, tom. nerd news. ftc staff members oppose the deal, concluding that it will not help consumers. they conclude that the merger should be sent to a hearing. that could be a significant roadblock for comcast and time warner. no one involved in the talks is commenting on the record. in brazil, the national oil company has put a price tag