guy: stocks slide. european equities trade lower and a host of earnings disappoint and fierce grow about the u.s. economy. francine: down day for banks. b.n.p. paribas also down while reporting a slight profit increase. r.b.s. posts a bigger than expect loss. guy: we speak to the holcim c.e.o. and that company's earnings and merger with lafarge. good morning, everybody. welcome. you're watching "the pulse" live from london. i'm guy johnson.

francine: i'm francine lacqua. central banks are in focus today. the fed left open the possibility of raising interest rates in the second half of the year. guy: bank of japan kept the status quo. it will keep adding 80 trillion yen to the monetary base. brazil's central bank boosted their interest rate for the fifth time in an effort to fight inflation. finally the russian central bank rate decision. francine: for more on this let's bring in james, a senior economist. let's talk fed. it seems yellen is hanging on to this rate increase despite the weak economy? is it a sign that she expects it to increase or is it a sign they are trying to give to the markets? james: they are expecting real household income growth which they sounded upbeat about in the statement. it will feed to consumer

spending and increased business investment down the track. i think they are hopeful that is going to happen. it struck me by not -- after the march meeting and by not saying there was no predetermined path like they said in the march statement, there is an opinion that -- they might get derailed by the data but they are not sure so they are keeping their options open. guy: i was trying to figure out exactly what was happening mere. my con sclution they are -- some of the locks they have put around themselves in terms of the language they have been using. taking those out. james: even that is in a sense hawkish. francine: when are you expecting the interest rates to raise? for a long time we were looking

a bit behind the curve. if anything now we're a bit premature. yesterday's statement gives us some comfort that they could still go by september. the evidence that we're seeing on the economy is there is going to be an overall bounce in the second quarter. guy: is that the data soft because over the weather or because of another factor? why are the data as soft as they are? james: weather is a factor. the u.s. dollar depreciation is a factor. the oil is down. there are other issues in there too. the broader business investment story, equipment. very soft for two quarters now. guy: very high at the moment. james: that was probably unintentional.

francine: when you look at the u.s. consumer, he is not back. will he ever be back? james: the feeling that i have that they will be back. noting the encrease in household income. i think the fed is hoping there is going to be a bit more of an inclination to spend on the part over the consumer with this newfound income. also, because the labor market might be generating some better incomes. having said that, jobs is going to be pretty weak going forward. guy: you till believe that the fed will raise rates this year. james: yes, we have a september forecast. we haven't yet seen enough weakness in the data to justify moving that. francine: how much are they looking at the dollar?

james: looking at exports. francine: why hike in september? james: they have a view on the broader economy that it will be starting to improve by then. inflation, which has been run to go low should be hitting back towards -- and the forecast, at some point they have to remove this extraordinary policy that has been in place. the last time they hiked was 2006. so i think there is going to be a strong opinion on the fed that they want to normalize policy because of the unknown risks of running that easy policy for too long. guy: what do you make of the price by the german bonds? james: absolutely crazy. you would think that would be a negative in bond yields. the inflation numbers came out in germany benign. it was a positioning story. it was getting out of a position story. nothing fundamental there.

there were a lot of crazy price actions on a lot of markets yesterday. francine: does that make you more worried if we were to see a default on greece, an event on greece, let's call it. given that we have seen a really sharp movement in the 10-year germany, you know, the markets can react much more than what the markets are foreseing at the moment. james: i'm not sure. i get the sense compared to 3 1/2 years ago, the fallout from the greek debacle, default, what have you, would be much less than we had back then. there is confidence in facing the european central bank under draghi that he will do what he needs to do to ensure there is not the contagion. i have to say if there were to be some split separation of ways that it would be very painful, for greece in particular.

guy: if you were draghi looking at the price action what would you -- what would you be making of it in terms of policy formulation? james: he can keep buying more bonds can't he because the yields are rising which helps the margin, i suppose. he has to take a bigger view. since he started hinting at q.e. last year, the euro this is depreciated sharply. it is back to where it was when they actually started the program in march. the u.s. dollar is there. the e.c.b. chief, draghi and janet were winking at each other in august last year in jackson hole. i don't think anyone would have imagined policy would have taken the turn that it has with the fet not tightening at all and the e.c.b. running its awesome policy that no one thought they

could ever put in place except me. francine: there you go. senior economist at westpac. guy: james thinks there is still the possibility of a rate hike coming through from the fed. do you think the fed will raise rates this week? tweet us at flacqua and guyjohnsontv. francine: tumbling crude prices have hit shell. their first report since announcing their $17 billion acquisition of b.g. >> it was a big beat. they expected 2.5 billion. down 56% on earnings last year. oil prices down 50%. about $1 so a barrel last year to about $55 in the first quarter this year. you know, it was interesting to see the result from investors,

how would they react? share price up a little bit. no one incredibly surprised after we awe all of the european oil companies beat estimates and all of them for the exact same reason comes down to refining. really saved their bacon and alsoing. we had a lot of volatility. that helps those traders. here is the question. will the share price of shell stay up today? if history is a guide, almost certainly. last time they reported their first quarter earnings in all of those cases, the share price had gone up 3678 this could be a clean decade. a niss little victory for the -- a nice little victory for the c.e.o. ryan: a beat. you know for many of the same reasons, refining really helping out there despite the huge drop

in the crude price. another thing, the company announced was an -- of about 6 billion on its u.s. assets. these are unconventional shale drilling assets in pennsylvania ohio in the east in north dakota and montana. all the big oil companies that have had shale assets in the united states have written down those earnings. you might remember shell had a huge write-down last year. the reason was natural gas prices very low in the united states. that was going to come. investors, you wonder, impairment. are they hearing-impaired? it seems like it fell on deaf ears. no one cares at all. francine: thank you so much. ryan chilcote with the latest on shell and statoil. guy: we have had a lot out of europe today. s.p. micro falling short.

underscoring the pressure it is seeing from rivals. francine: beating estimates. you can see basf beating estimates. the only gainer really, if you look at the three, stmicrodown. nokia and sanofi down as well. guy: let's take a look at what else is on our radar this thursday morning. greece and europe targeting a preliminary deal of may 3 for a deal. francine: lafarge reported first quarter 593 swiss fraungs below estimates.

we'll be joined later this hour by the holcim c.e.o. that is a conversation you don't want to miss. guy: airbus earnings fell in the first quarter. the drop comes after its airliner unit delivered fewer planes. the company confirmed slightly higher deliveries for 2015. francine: we'll look at r.b.s.'s loss and b.n.p.'s surprise gain. veteran hotelier joins us. we'll get his thoughts on the u.k. politics ahead of the election. ♪

francine: welcome back to "the pulse" live on bloomberg tv and radio and streaming on bloomberg.com, your tablet and phone. guy: r.b.s. posted a larger loss than estimated. b.n.p. paribas reported a surprise jump in profit. shares are trading lower. let's find out what is going on. richard, let me start with you. my sense, having looked at the numbers is we're going to be stuck with this for quite

sometime. richard: i think that is the case for sometime. heading into the election the government seeing r.b.s. still making losses seven years. 45 billion pounds of taxpayers money. it is a huge amount. the biggest banking bailout in the world at the time. it has posted yet another loss. underneath that, the business is doing ok. they are improving. when you strip out all of the restructuring costs that they are taking. taking a big charge for potential fine for currency market manipulation. payment protection insurance which rumbles on here in the u.k. not going away any time soon. we're stuck with them for a while. francine: what are the hurdles that they have to overcome? is the bulk of it defined and they just to have get better at what err they are doing?

richard: exactly. 3 the bulk of it fines, customer address programs and a smaller number, 450-odd million towards the restructuring toward the investment bank mainly. they are taking out a huge amount of costs there. that is having an impact on the earnings. the profitability of the business is they take out more employees and more business lines and that is going to recur in each quarter, the management of the bank said today. we're going to still see that throughout this year as they try and create the banks that they want to have in the future. guy: an odd way of looking at this. with all the fines and p.p.i. effectively, tuck taxpayer is getting a really big dividend because they keep throwing money back. francine: that is a good -- guy: i'm trying to look for a positive spin on this story. seriously, how long is this going to take to work out? richard: quite a while yet.

the management said they would like to start paying dividends. they are thinking about this kind of thing at the moment which is crazy given that still making losses. however they said they would like to do that one the next parliament. that is a five-year term. francine: long term. richard: it is indeed. the government said they would like to start selling shares of r.b.s. as soon as practical. george osbourne said he would like to as soon as the next parliament. it is going to take longer than perhaps he might hope given that r.b.s. is going through this massive restructuring program still incurring costs with that over the next couple of years. there are fines to come. it is going to take longer than expected. francine: richard, thank you so much for the latest on r.b.s. our banking reporter there. now let's move on to b.n.p. paribas' surprise profit surge. the stock is trading lower. caroline, walk us through the

numbers. caroline: good morning francine. the earnings were well above estimated. there is a mixed reaction on the markets this morning. the shares are trading lower. it is good on trading. it is slightly disappointing on capital. some analysts said they are slightly disappointed by the capital ratio which will remain stable at 10.3% and the leverage ratio which fell from the first quarter of last year to 3.4% in the first three month s of this year. so the good headline on the investment bank might be slightly overshadowed by the softer performance elsewhere. the investment bank did indeed post a very good performance. the pretax profit was up 88% to 1.13 billion euros compared to last year. a very good performance here of the investment bank. and it is also seeing a gradual

recovery in demand across the eurozone. they had a better position. also a better performance in italy and belgium. a slight disappointment also on the pretax profit. i spoke with the c.f.o. of b.n.p. paribas and asked him whether this recovery was attainable for b.n.p. >> makes sense from a good performance and in our specialized businesses. as coupled with positive -- meaning our revenue is outpacing our cost low cost of risk, the acquisitions that b.n.p. paribas did last year. acquired later in france then germany. these elements contribute as well. but the main thing is if you look at c.i.b., it contributed if i look to the exchange rates it contributed an increase of

13%. 15% global markets. 15% corporate banking. all stemming from business demand. high transactional volume on security services and actually growth in europe and asia pacific topped off with strong growth in the u.s. caroline: do you foresee this is going to be sustainable? >> there has been a good demand in quarter. equities business is up. let's not forget from a strong quarter actually last year, i would say it is off to a good start of the year. we'll see how -- the glimmer of hope translates in a sustainable growth. caroline: this glimmer of hope is continuing today? >> what we see in the first quarter is what we see if we look at our domestic markets for example, we have an increase of 1.6%. a first indicator of some progressive returns.

caroline: so there is a glimmer of hope this year for b.n.p. paribas. the shares are down this morning but it has translated in a 15% rise in the shares since the beginning of this year. we'll have to see how the u.s. economy slowdown plays into b.n.p. paribas next month. -game coming up, is greece headed for an exit? those polled by bloomberg say yes. details next. ♪

francine: a majority of investors surveyed by bloomberg said that greece will leave the euro. the finding comes as greece and its euro area partners are steppings up talks. guy: to fiend out what's going on, hans nichols has the latest. so the numbers on the poll with quite tight but the majority still has them leaving at some point. hans: yeah. 52%. what is remarkable another 52%, surveys that view bloomberg, it was just 31% four months ago. you really see a change. that is one of the reasons there has been a stress on the banks and just yesterday it increased by 1.5 billion euros up to 76.9

billion. real stress on the banks. guy? francine: hans what is with the sudden optimism? hans: one, mr. tsipras is saying i'm in charge now controlling things. that is part of the optimism. i would caution against that saying we just heard from an e.u. official saying that the idea of having a deal done by sunday would be optimistic. we spoke with a leader who has been talking about the challenges and what other countries can learn from the greek situation. good interview we had with them. now it seems there is optimism on greece. we'll try to report back a little bit more and get a better sense on whether this optimism is merited. guy? guy: hans, thank you very much indeed. hans nichols joining us from berlin. francine: coming up, we'll talk to a holcim c.e.o. first about its latest earnings and its deal

with lafarge. guy: you can tweet us. join the conversation. get involved at guyjohnsontv and fran seen is at flak flacqua. ♪

' d i'm guy johnson. these are the bloomberg top headlines. francine: the federal reserve has left open the prospect of a rate rise this year. after a policy meeting, the chair, janet yellen, and her played down the significance of the u.s. economy's slowdown. they say growth will pick up to a "moderate pace." guy: brazil's central bank has signaled it will raise interest rates in june after increasing

them for the fifth time since october. the key rate is up by half a point overnight. the decision means brazil is the only g-20 nation to raise rates in 2015. francine: the leader of spain's podemas party has weighed in on the euro crisis. he told bloomberg that european powers should not oppose too harsh reforms on britain. >> it is a problem for european democracy. we have to negotiate and we have to organize european powers in a different way. it is impossible for a state to pay the debts without austerity. guy: interesting view. holcim reported higher first-quarter profit this morning. the company is in the process of merging with lafarge to form the world's biggest summit maker.

we are joined now by holcim's ceo, bernard fontana. thank you for taking the time to join us. the first question is, what happened in the middle east and africa that dragged these numbers lower than people were anticipating? >> first, good morning. africa is a bit down because there was very bad weather at the beginning of the year. this is a kind of one-off. the net income of the company has more than doubled in the quarter at 178 billion swiss francs. the return after tax is now 8.1%. it goes in the right direction. cash flow increased by more than 12%. we report -- in q1 this year

compared with previous year. last year, there was almost no winter in europe. the contraction season started already in january. we also saw -- [indiscernible] in india compared with the previous year. globally holcim has been able to improve the price by 4% compared with the previous year which is better than we experienced in the past. this combined with the fact that we continue to cut our costs means that we improve our margins and we confirmed our outlook of an improved operating profit between 2.7 billion and 2.9 billion swiss francs. francine: mr. fontana, give us a sense of how concerned you are

about foreign exchange in the coming months. bernard: for foreign exchange we are accustomed to this. we have a translation effect when we convert from swiss franc, for example. when you put them in your will they increase by more than 10%. we finance in the local currencies. a strong swiss franc is good for us. guy: analysts this morning are quite happy with the way the relative performance of holcim and lafarge is working out. they think it is going to make it easier to put this deal together. lafarge looks like it slightly outperformed in some people's books. you slightly underperformed. is that a good thing?

is the company coming together as a single unit actually going to be favored by this? bernard: first, we report in different currencies. the swiss franc is a much stronger currency, but this is not really the subject. we are working hard to make this merger happen. the next step for us is the general assembly that is called on the eighth of may, where our shareholders are invited to approve the capital increase for the merger to happen. our board has recommended this merger. we are confident that we should get a positive vote. francine: so just to get that right, mr. fontana, you are sure you will get full shareholder approval? do you think they will ask for the board to move? bernard: i -- what i tell you is

that we are confident that we will get the positive audience. guy: are you already working with the new ceo, the new team to make this all happen? are you confident enough this is all going to take place? are you waiting to see what the final outcome is? bernard: we continue to work very hard to keep the company line. by design, this merger is a long process. it is a challenge for all our guys to keep the company focused. at the same time, we were there -- we prepare the merger. to make sure that the transition happens very smoothly, this would be the case. francine: all right, mr. bernard fontana, thank you for joining

area -- joining us. guy: bloomberg also spoke to the lafarge ceo about the deal with holcim. take a listen. >> we are confident in the beginning, but more and more confident on the success of the merger, because the merger is very credible in terms of value creation, immense potential to transform our industry. we will create this new company together with holcim. francine: that was the lafarge ceo speaking to bloomberg exclusively. guy: let's get the word from ubs. good morning. and in a in europe -- m&a in europe certainly picking up. when you look at a deal like holcim, putting it together with lafarge, is that the anomaly inasmuch as they say europe on

europe? do you think we will see more your u.s. into europe feels? >> the obvious factor is the fx. for growth being short, it is an opportunity for u.s. companies to look at growth. francine: megamergers are very difficult. you may have the best intention in the world. are there secrets to getting these right? if you look at lafarge and holcim, they seem to be sitting better because the culture could speak -- could be similar. gareth: these are complex transactions. i think it is a function of getting the right synergies that you mentioned, the right corporate fit, and from an antitrust perspective, that is key as well. guy: the personality story nearly tripped this deal up. how important is it to get personalities right?

increasingly, it looks like it is. when we went through the previous m&a cycle, i thought it would play a lesser part. it seems this time around, i'm hearing more and more stories related to personalities. gareth: you are taking a very small sample set. you are right, it is a key component, but it is one of a number of components in a complex process. there are not many deals to look at, so it is difficult to put factors together. francine: thank you so much. gareth stays with us. iag says it has relaxed talks with aer lingus. why willie walsh is in no rush to complete a deal. ♪

francine: welcome back to "the pulse." guy: here are some more of bloomberg's top headlines. francine: bnp paribas has had a good first quarter thanks to its investment bank division. bnp's investment bank saw pretax earnings surge. revenue from equities trading jumped 23% while fixed income sales were higher by 33%. guy: royal dutch shell suffers a fall in profits as average brent crude prices slump by 49% in the first three months of the year.

numbers were well ahead of expectations. francine: airbus miss revenue estimates after it delivered fewer units, but confirmed its outlook for the year. guy: staying in the air, iag posted a first-quarter profit and reiterated its 2015 forecast. kari lundgren joins us now. what was behind the strength in the numbers for iag? kari: really strong numbers from iag as you said. this is what is traditionally a weak water. british airways returned to profit. iberia they narrowed their loss. welling, they were flat on their earnings. what we are really seeing is what has been going so well at iag the strength of the north atlantic. they are really working through the issues in the transformation

process at iberia. all those factors are coming together to make willie walsh very happy. francine: you also spoke to the ceo, willie walsh, earlier. did he say anything about his bid for aer lingus? kari: it was interesting that they mentions nothing about aer lingus. the focus today was on iag. having said that, it obviously came up on the call with willie walsh, and he made the point that they are relaxed about this. they are under no pressure. they are not putting any pressure on the irish government or anyone else. it seems like he wants to get a deal done, but at the same time, he wants it to be the right deal for iag. he is not afraid to walk away. he wants this to work for everybody. he is willing to be patient. guy: let's talk about air france. not such a good story. kari: no they are probably

looking across the channel and wondering what they can take out of mr. walsh's notepad. it was better in terms of the lost it narrow but the productivity that they are seeing at iag, the productivity gains, are not coming through at air france. they are struggling with getting these different transformation plans and projects to stick. they went from the transform 2015 plan, to now the perform 2020 program. the management will be meeting with unions and staff members today to discuss improving productivity, but we will just have to wait and see whether any of that starts coming through and whether they can take on the challenges and start shaping up in the way that iag is seeing things come through. guy: thank you very much indeed, kari lundgren. francine: m&a values are up in

europe by over 30% compared to last year. for more, we are joined by gareth mccartney. thank you for sticking around. we were talking before about these megamergers that are happening. it seems that there is a trend to consolidate. you were saying this is because assets are now cheaper. it is also cost-cutting in a very uncertain world. gareth: i think it is two things. one is a search for structure. second, it is about market repair and structural reform within individual sector groups. guy: where are we going to see most of the m&a activity in the months ahead? where are the big rumors coming from? is it the oil sector, banking, where is the story? gareth: i think there's a few sectors in europe that are worth focusing on. we've done a lot of restructuring of balance sheet. that is one sector that is relevant.

the telecom sector has seen a consolidation theme. we have a regional structure in europe. and i think real estate as well. francine: how worried are we about regulators? they seem to have a little bit more teeth than they did two or three months ago. we've heard of a lot of big mergers having to be stalled or abandoned because of that. gareth: these are very complex, very much one-off situations and regulatory concerns are a big factor within that. i don't think that's going to change. guy: what is going to change? what is happening in this space that is going to be exciting? is there anything that is really going to move the dial beyond the expected? gareth: i think it is just a continuation. the numbers are up. if you look at where the u.s. was, i think they are further ahead in this cycle then we are in europe. there is further to go.

there's a number of other factors. i think ceo confidence levels are high and the markets are rewarding deals getting done. i think all those factors mean continuation of a good trend. francine: gareth mccartney head of m&a at ubs. guy: we are going to take a break. our twitter question of the day, do you think the fed will raise rates this year? we will take a break. "the pulse -- ♪

francine: welcome back to "the pulse" live on bloomberg tv and radio. guy: for another bloomberg exclusive interview, manus cranny sat down with a veteran hotel he a -- hotellier. as we count down to next week's general election in the u.k., i started by asking if coalitions were always a bad thing. >> yes, i think they are. because we don't have decisiveness as a result. it is something we have seen in the last five years. manus: what is the worst-case scenario for us in the u.k. as we go to the polls? >> the worst-case scenario would be a labor-snp coalition.

the labor manifesto, i haven't seen such a left-wing manifesto since the 1960's and 1970's, talking about rent controls, price controls, more labor laws. all things which are going to hurt as this. -- hurt business. all this talk of non-dom's. they are already packing their bags. manus: is that really true? do you think the non-dom issue would wreak havoc -- we are in mayfair, the heart of non-dom. >> this mansion tax is terrifying everybody. if there's talk of a 1% value, you have a house which is worth say $15 million, you are paying $150,000 a year. you'd better sell your house, or you rent it. you rent a house for that.

manus: here we are, going to this election. none of the leaders have a clear lead. what has this tory administration done wrong that they haven't convinced the country of the constructive things that they've done? what has gone wrong for cameron? >> i don't think there's a clear idea of where they are going. as a lifetime conservative supporter, i don't have a sense of the direction in which cameron wants to go. i think that's something that filters all the way through. francine: all right. i like it when ceo's weigh in on the elections. we've spoken to a couple ceo's, and they say, the coalition hasn't been doing that bad. guy: a lot of people don't like the idea of coalitions. staying on the elections

predicting record levels of betting on next thursday's vote. one of the verse -- the most uncertain political battles in years. francine: bloomberg went behind the scenes to see how the odds are stacking up. >> it could be a coin toss, this race. at the minute, it would be -- [indiscernible] that is what got me into it when i was much younger. i played lots of poker. i think it will probably be a hung parliament.

political betting is booming. the money is pouring in by the ballot box. take ukip. you might not want to tell a poster that you are a ukip man however, if you are -- we are seeing a lot of money for farage. the polls are saying it is quite close. >> you find the trading, setting the odds, making sure the liability is in control. whatever is going on around the world, we got our guys looking after it. we've got some greyhound experts here. there's greyhound racing going on as well. you will find guys controlling liabilities for shops, making sure that we are all aware.

we are pretty confident that this is going to be the biggest political betting event of all time, based on trends from 2010. it looks like it is going to be two or three times as big as that election was. the whole u.k. betting industry is up to about 100 million pounds. polls are just snapshots of opinion. they are not designed to be predictions. bedding is exactly that, people trying to predict what is going to happen. in that situation, it is a way of addicting what will happen. most of the money is bid on the tories. right now, not many people want about labor. that may be the way things are going for us. guy: i'm glad to see bloomberg television there.

francine: guy johnson, horseracing. for those listening on bloomberg radio, "the first word" is next area for our viewers, a second hour of "the pulse." ♪

a surprise profit increase. rbs taking a bigger than expected loss. francine: unemployment and inflation are crossing wires. inflation is expected to come in flat. 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." we are getting breaking news. inflation is unchanged. guy: pretty low. the employment data coming out. it is slightly above forecast. just a touch above forecast. the last number, the fed number, 11.3%. not a lot to write home about. not exactly great data. francine: nothing to write home about. well, not great data. greece and its euro area partners are stepping up to break an impasse over bailout aid. guy: hans nichols has the latest. hans: good morning.

52% of investors surveyed by bloomberg think that greece will exit the euro. three or four months ago, that number stood at 31%. 43% say that greece will stay in the euro. what about the timeline? when will it happen? this is really interesting to me. 18% by the end of next year. 22%, 2015-2016. 12% after 2016. this is an important number. expectations influence what is happening in the markets. we have seen a great deal of pressure on the greek banks. they increased emergency liquidity assistance to roughly match capital outflows.

they were at 60 billion euros at the first ela increase. almost 17 billion has left greek banks and that will be a drain on economic output. francine: now that the greek finance minister has been sidelined, has there been any progress? hans: last night, there seemed to be a great deal of progress on this call. the could be a temporary agreement on sunday night and then have finance ministers ratify that on may 11. some of last night's optimism has been tempered by one eu official who says it would be optimistic to think that you could get a deal done by sunday. there is still a lot of distance to be traveled. greece still has its redline. those are still not incredible -- credible to the european

finance ministers. if greece is talking about a temporary deal, what we have heard over and over us that the institutions want the program to be completed. any talk of a temporary deal with a partial disbursement, i discount that just from everything berlin and brussels have been saying. guy: let's talk more about the political spectrum. watching very closely what is happening in greece. what lessons are the fringes drawing? hans: they look at the responsibilities and see it as a bit of a model. >> i don't like the word radical. i think what is forgotten and

the eurogroup is common sense. i think they are negotiating good. they have support of the greek people. they are able to accomplish their program even if the negotiations are quite difficult. hans: he did say that he had spoken to mr. tsipras recently. he said, being prime minister is a lot more difficult. grease is figuring that out now. will there be enough time? i know i sound repetitive. every day that passes gets closer to a cash crunch for greece. guy: running out of a runway is what people are talking about. francine: lafarge reported

earnings below estimates. holcim reported higher profits. guy: airbus earnings fell in the first quarter. they delivered fewer planes. their output will be higher for the fourth term of 2015. francine: crude prices at royal dutch shell. average crude prices slumped by 49% for the first three months per year. guy: we are going to speak about bond sales and first-quarter profits. that is after the break. francine: join us on twitter. you can tweet us. ♪

francine: welcome to "the pulse." it is a down day for banks. rbs took a larger loss than expected. bnp paribas shares are also trading lower. richard, let's kick it off with you.

rbs did not post great figures. richard: it is a loss for the royal bank of scotland. this is a quarterly loss. a year ago, they made a profit in this quarter. it is a big turnaround on that however, it is not to be unexpected. last year, they said that they would overhaul the investment banks again. they are going through big restructuring programs and those come with costs. they are also still facing fines. guy: richard, we are going to keep this short. let's go to paris. what did we learn about bnp? >> this was well above estimates. bloomberg estimates that the shares are down this morning. they are less than earlier.

they were losing as much as 2% earlier. investors are looking at the capital ratio. the capital ratio remains stable at 10.3%. the leverage ratio fell. however, very good performance for bnp paribas in the investment bank division. pretax proceeds at the investment bank jumped 88% compared to a year earlier. we will have to see how concerned the bank is going against of the u.s. economy and the slowdown in the u.s. economy going forward. they said they were confident that the u.s. economy was still going to recover this year.

they have big units there. we will have to see how this plays in the balance going forward. francine: thank you. guy: let's move on to reinsurers. swiss re beat estimates by 17% helped by bond sales. we are joined by the chief financial officer, david cole come over the phone. good morning. the market seems a little bit comfortable. the stock is trading down a touch. the market is down. walk us through what you are having to do at the moment with a strange environment in the european bond market. david cole: first, thanks for having me. indeed, we reported good results. the market is perhaps a little bit stretched on the bond side. with the protracted low interest

rates and the fact that the monetary authorities are still quite active with quantitative easing in europe, a lot of asset prices are being driven up. we are a long-term investor and are not overly responding to the short-term developments. we positioned our portfolio to absorb the volatility and to be somewhat opportunistic. francine: what kind of negative yielding debt do you own and why? david cole: i did not hear the question. francine: do you own any negative yields? david cole: we have some exposures that indeed are negative yield, matching our liabilities, are shorter term liabilities. we have a cai -- high quality, well performing running yield. guy: do you expect your number to go up or down? do you expect the curve to flatten? david cole: if interest rates

remain a current levels we would expect that number to decline going forward. francine: are there any asset classes that you are not considering investing in that you have not done previously or adding because of the situation we're talking about? david cole: there is no specific new asset class that we are seeking to invest in. we are going to maintain a high quality portfolio. we are not seeking to go down the credit quality curve or invest in exotic structures. having the well-balanced portfolio we maintain over a longer period of time is essential to our overall business model and it is what investors expect of us. we are looking to see further development on the infrastructure market and we would like to be able to invest in long-term, high-quality infrastructure to complement the government bonds we hold. our investment portfolio is more

positioned the way we would like to have it positioned. bodily, there is that much change going forward. guy: you have mentioned long-term a number of times during this interview. how long do you think qe is going to be operational in europe? david cole: at this point in time, i have no reason to disbelieve what the ecb has said itself about their intentions with quantitative easing. they have been quite clear about their intentions. i think it would be appropriate to bear that seriously in mind. francine: do you think that qe is definitely working and will continue to work or have we seen the main impact at the beginning? david cole: i think it is too early to draw any conclusions. i think the intervention of the central bank is having the impact that they would have liked to have seen, looking at it from their perspective. how much of a long-term impact it will have, i think we will

have to wait it little bit longer to draw conclusions. guy: you are a long-term holder but nevertheless the price action in the bund has been extraordinary over the last couple of days. do you think we are going to see more of the volatility or that this is a blip? david cole: i think it is fair to expect that there will be ongoing volatility in the marketplace. everybody is trying to determine to what extent and at what pace the banks will withdraw their easing in the market. the indication is that the fed and the bank of england will be earlier to do that than the ecb. i think it would be reasonable to expect that there will be ongoing follow till of the. guy: we conducted a poll of bloomberg of investors. 52% of them came back and said that they expect greece to exit

at some point. moody's has put out notes saying that a greek exit from the euro area could significantly disrupt the government debt market. talk to me about tail risk associated with greece and how you try to build that into what you do. david cole: first and foremost, we really have no exposure to the greek sovereigns. we have not had for quite some time. our business is all about managing risk including tail risk for markets when we can. we look at it on a fairly regular basis. it is not up to us to predict it but it is up to us to prepare and be ready to react. the way we position ourselves disruptions in the marketplace may present opportunities for us. we could be an opportunistic buyer for a forced seller. guy: do you think that kind of

scenario would throw up that kind of opportunity? david cole: i think any move of any of the member states to exit would certainly create heightened volatility in the marketplace. francine: we have been trying to figure out if greece were to exit the euro, what happens the next day? on the day we find out, do the markets freak out? what happens? david cole: it is not up to us to predict what may happen if greece may exit the market. it is up to us and other in the market to prepare for different scenarios and be in a position to respond. guy: can i also ask you about pricing? people are searching for yields at the moment. what do you think the outlook for pricing is in your sector? david cole: as long as actual levels continue to remain low it would not surprise us to see

continue softening and some of the pricing levels. there were new participants coming into the marketplace. we are a little bit cautious about that. we think it is important for people to understand the risks they are putting on balance sheets. we have had a long period of relatively benign events. we would expect that to revert to the mean at some point. guy: you think that it will revert to the mean? do you disagree with risk growing? david cole: i don't know if the risk is growing. it is hard to predict. we have no reason to believe that there are going to be fewer net cats going forward. 2014 demonstrated a large number. we certainly would recognize the tragedy and the loss that they have had.

ultimately, losses will continue to increase as a result of increasing economic worth around the globe and development in areas subject to higher frequency events due to climate change or natural catastrophes. we think losses will revert to the mean. francine: thank you so much. david cole, the chief financial officer of swiss re. ♪

francine: welcome back to "the pulse." let's get more on greece and bond yields. thank you so much for joining us. give us a sense of what concerns you most in these markets. there is qe, there is risk being priced in properly there is wild variation on bond yields. marcel: at the moment, there is a lot of uncertainty, particularly whether the ecb policy will be effective. there is a lot of uncertainty about greece, what will be the next step might there be an impact on the euro area? a lot of people say, no, we can manage. i am not so sure.

germany would be affected by the spillover. i think germany is very much aware that if there is a collapse in southern europe germany would be affected, too. guy: what is your view? we are getting awful close to some fairly key payments that may or may not be made. marcel: to me it is very much like early september 2008. we were so sure we could manage lehman. we were completely wrong. the same now. greece is very tiny. 2% of euro area gdp. everyone feels we have the right insurance mechanisms, the right risk mechanisms, esm. italy is in a very poor state. very high debt. you have no growth. the economy has shrunk by 10% over the last seven years. it is still recovering from its

third recession in seven years. we don't really know. that is the answer. francine: what would happen? banks freezing the capital markets? a run on the banks in greece? if an event were to happen, are we seeing a collapse in nascent recovery or much worse? marcel: the main channel is probably through financial markets through banks. we have seen improvement. capital has improved in many banks in europe, but still they are very volatile. the economic recovery is very weak. the economy in europe is still overbooked. some people are saying we still need to see consolidation. if you have a look of trust -- lack of trust in financial markets, liquidity freeze is -- italian bond yields might shoot up with respect to the german 10

year yield. it is hard to know what happens. the risk is there. it comes through freezing in financial markets. guy: his policy right at the moment? is austerity the right policy at the moment? marcel: we are trying to balance it at the moment. the fiscal deficit is above 4% this year and it is not a great moment. in germany, we need to consolidate that is the view. i think it is the wrong view. i think we need to balance it. i think we have the balance right at the moment. it is not restrictive. that is what we must be aware of. growth remains a big challenge. guy: hold that thought.

we will come back and talk a little bit more. we are going to take a break. we are back in a couple of minutes. we will carry on talking about the wider central-bank story. ♪

francine: welcome back to "the pulse." guy: these are the bloomberg top headlines. francine: the federal reserve to has -- reserve has left open the prospect of a rate rise this year. janet yellen and her colleagues played down the significance of the u.s. economy slowdown to a near standstill in the first quarter. guy: brazil's central bank has signaled it will raise interest rates again.

it has already done so overnight, increasing them for the fifth time. the key rate is now up to 13.25%. francine: the leader of spain's podemos party has weighed in on the euro crisis. he says they should not impose overly harsh reforms on greece. >> it is a problem for the european democracy. we have to negotiate and we have to organize the european powers in a different way in order to assure the prosperity of greece. it is impossible to pay debts without prosperity. guy: the markets, lots of stock news. lots of bond market news. jonathan: what a fascinating market this has been over the last couple of days. this is the theme for you. pretty much dead flat on the

fste 100. it is the monthly total, the scorecard for the month that has quite significant stories. the dax heading for the first month of significant losses in five years. equities selling off. the bond market selling off over the last couple of days. not just on the periphery, but across the whole eurozone bond complex. yields are up for basis points today. 0.33%. a week ago, it was five basis points. yesterday was pretty ugly for german bonds. what a move in the bond market. what a move in oil. i am going to bring up the 30-day chart. brent crude saw its biggest month of gains since 2009.

a 20% pop over the month. i bring up equities, bonds currencies, commodities. it has been a reversal across all of these asset classes. the euro is no different. the euro 1.1195 for much of the morning. that is the first month of gains for the euro since june of last year. a lot of reversals this week. back to you. guy: it is a crazy market. can't figure out what is going on. fairly big market moves. francine: central banks in focus. the fed left open the possibility of raising interest rates in the second half of this year. the central bank of japan maintained the status quo. guy: brazil's central bank boosted the central interest rates for the fifth time.

the decision from the russian central-bank is due out a little bit later on. let's get back to our guest, who was in the hot seat right now. let's ask you out twitter question of the day. will the fed raise rates this year? marcel: my answer is yes, it will, they will postpone it. fourth quarter, at the end of the year, we see the first rise, that is my guess. managing monetary policy is incredibly difficult. the risk is a lot of volatility and uncertainty in the financial markets. francine: they hike rates because they want to give a signal to the markets or du think that by that time the u.s. economy will be strong enough? marcel: i don't see big impediments to the u.s. economy recovering. we see the labor market still being positive. we see global growth picking up

even though emerging markets are not as strong as they used to be. i see every indication that the u.s. economy should recover. they have a lot of potential. you see consumer confidence which is still relatively robust. i remain optimistic on the u.s. economy, that it will manage to speed up and recover over the next few quarters. guy: what is mario draghi learning right now about what the fed is doing? marcel: for the ecb, the issue of an exit is still far away. they will still keep buying government bonds at least until september 2016. how will it get out of the low interest rate environment? it is somewhat easier for the ecb to manage that exit because it conducts monetary policy in a different way. one of the big challenges at the moment is you have two divergent patterns. they are trying to ease the exit

and that puts pressure on the european market on europe, on long-term government bond yields. i expect this to continue for the next few months. volatility may continue to pick up as we get this divergence playing out. francine: do you think we will get euro-dollar parity this year? we were close and now it is blown out of the water. marcel: you know with changes it is almost like flipping the coin. you can hardly give a good prediction. equilibrium is somewhere around 1.15 to 1.25. sure, it could drop further, it could go to parity. my best guess is we will see a fluctuation somewhere between

parity and 1.15 reflecting that the european economy is weaker than the u.s. economy. if we get a grexit i think we could go below parity. that is my prediction. i think greece will stay within the euro and we will stay above parity. guy: which is the biggest threat? marcel: it depends for whom. [laughter] marcel: for the u.k., grexit. for germany as well. i think the u.k. is much more of an important economy for europe overall. it is much more important to have the u.k. within the eu. in the long run, the bigger cost is brexit. in the short-term grexit. francine: the u.k. is trying to

renegotiate before they get a referendum. do you think that the red lines would be given into? marcel: there are a couple of red lines and one of them is labor mobility. there is a clear understanding. people must be able to move freely and you cannot compromise on that. there is a clear redline on banking. the interest in berlin and brussels is that you will have to continue to have a europe that integrates much more quickly. you need much more integration to make europe work. that is another redline. if the u.k. says, we don't want you to move forward with integration, that will be a redline and the u.k. will face a tough challenge. francine: thank you so much for joining us today.

the president and ceo of the iw berlin -- diw berlin. guy: shell and statoil. we will run through the numbers. ♪

francine: tumbling crude prices

have hit royal dutch shell. it is the company's first report since announcing its acquisition of bg. ryan chilcote is here with the latest. ryan: in terms of year on year, it was a 56% drop in profit but the oil price dropped by about 50% as well. refining really helping out helping shell, just like it helped the others. also, trading. trading thrives on volatility. there was plenty of volatility in the first quarter of the year. i kind of wonder how much of a balance the share price would get at the open.

investors are still impressed and happy. the shares are up. on an adjusted basis, statoil has less of a refining arm, but they still have one. what stands out, beyond the fact that it was a beat in terms of net income, it was a loss. they took a $6 billion impairment on its u.s. asset writing down those unconventional shale assets that they have in the united states. statoil when it comes to oil companies in this part of the world, was one of the first big movers into the united states and shale in 2008. in texas, in north dakota, in montana. at a certain point, with the oil price falling and the gas price

falling in the united states they were going to have to rewrite those assets and that is what they have chosen to do today. shell had a massive write-down on their u.s. assets. investors don't really seem to care. investors a pair to be hearing impaired when it comes to that write-down francine:. that-- that write-down. francine: will the fed raise rates? do you tweet, trevor? trevor: i think they will raise rates. people are pushing out their fed rating expectations. the fed was pretty dovish overnight. they are going to bounce back from that week first quarter where you had a lot of upside damage from capex. a lot of companies have cut

capital spending massively. you are likely to see it more gradual positive from the consumer. i think the u.s. will bounce back. i think the year on year change in the energy price will factor in. i think the year on year impacts will be inflationary. guy: talking about the fact that this will be the loosest rate tightening cycle we have ever seen. terminal rates will be well below historic averages. is that right? trevor: it could well be, about terminal rates. what i would say is that the similarity to me is like the 1990's. we had lots of spare capacity we had the collapse of japan, the opening up of the soviet union's monetary supply, china slowing down in the background.

the backdrop is a dis-inflationary backdrop. as long as you get the china slowdown being the main story, it is going to be hard to get inflation going. francine: you're expecting the fed raising when? do we even care? trevor: we sort of care. the most important thing is that there will be a tightening cycle. when it starts, it is critical. in the moment, we are in a. period of fullback. my strategy has been long u.s. dollar, long u.s. equities come along japanese equities. -- equities long japanese equities. a lot of trades are unraveling. i have got some money in european equities. i am looking for opportunities

to get back into the u.s. and some things that will do well during the u.s. tightening cycle. guy: what have you made of the price action in european bonds over the last few days? trevor: it has been painful for the last few months. a few more smiles on faces. i think we have to be a little bit careful. my hunch is that the wheel -- there will be a gradual decline in yields. it may not be the beginning of a big rise in yields. second half of the year european growth looks like it is pretty good at the moment. the ecb cares about headlines. francine: what happens to greece? in or out? trevor: this is another reason why i am not desperately moving

into european equities. i think probably in. it will be pretty messy. it definitely matters. podemos in spain and all the for a free will start to think about exit if greece is exiting. it is going to be volatile. may tense to be the part of the year that markets peek out -- peak out. guy: you are talking about high yields because you think growth is going to carry on picking up. that is based on the fact that greece probably stays in. if you get a deal signed with greece would your view on investing in europe change significantly? trevor: my view in europe has been changing already. the models that i based my fundamental strategies around there has been a big improvement in europe and a big deterioration in the u.s.

the models are saying to short the u.s. and go long in japan and europe. francine: if greece were to exit or even default, what happens? trevor: you probably get a buying opportunity for the short-term on equity markets. it is a polite way of saying there is a big selloff. [laughter] trevor: it would be an intense, panic environment and it would be an opportunity to buy rather than sell. i have less of a strong conviction on the regional split . my trend in the u.s. leading the recovery and the dollar is breaking at the moment. growth should be pretty strong globally. there is no inflation at the moment. i think it is a good environment for stocks still.

guy: in spain talking about good environment for stocks, what is going on in china? trevor: it feels like the property market is still slowing down. that is why the easing is coming through. guy: is it rational, what is happening? or is it irrational? trevor: last time we had these environments was 2007 and i was in beijing in 2007. a student asked me if i was any good at being a bond manager and i said, i think i am ok. they said, how many times have you doubled or money this year? in china, if you have doubled the money twice, you have done well. we are back to that benchmark. it feels quite bubbly in china. francine: bubbly that would

burst sooner rather than later? trevor: i think a bubble-burst environment is somewhere where they would be tightening unexpectedly. it is hard to imagine, but there is a scenario that says we are in 1998, 1999. the u.s. bounces back. the european economy is growing strongly. japan is doing ok. inflation is picking up. everyone is raising rates. in that environment, the hits would come to income investing fixed income, then you could also get some effects on some of the equity markets. it is the tightening you should worry about. it is hard to imagine. ironically, a pickup in china a

pickup in commodity prices, that is the thing you should look for. francine: thank you so much. guy: coming up, what to watch -- pressure upon latest rate decision is due in the next hour -- russia's latest rate decision is due in the next hour. ♪

francine: welcome back to "the pulse." we are live on bloomberg tv and streaming on the ipad at bloomberg.com. guy: central banks.

let's get back to them. ryan chilcote joins us. we are waiting for russia. ryan: that is right. the expectation is that they are going to lower to 13%. there is a wide range of views. 10 analysts think they could go as low as 12.5%. five of them thought they could go up 200 basis points. almost the whole hog. 12%. there are two issues to grapple with. one is inflation. inflation at the end of march reached 15.9%. that is a major issue. for most russians, inflation is right at the top of the list of pulling of concerns. francine: this is food prices. ryan: food prices might even be higher. russians are used to inflation but they have always had inflation coupled with wage growth.

now, they do not have the wage growth, particularly if they are pensioners. the second problem is the ruble appreciation. you think i know what is the problem there? it went in the toilet and it has come back, good news. the ruble is up 13%. it is the worst best-performing currency this month. this year. the problem is that that affects the economy and the competitiveness of the economy. some people think it might go beyond the basis points. francine: peanuts. they are banned. ryan: peanuts are actually not nuts. the countermeasure to the sanctions against russia banning nats for its actions in ukraine -- nuts for its actions in ukraine, they remember that peanuts should be banned.

good luck finding the peanut butter after may 1. guy: that would be bad news for you. francine: that would be bad news. especially with good chocolate. keep it right here on bloomberg tv. it is "surveillance" for the u.s. ♪

>> this is "bloomberg surveillance." tom: the fed and the bank of japan go after inflation. they delay big decisions.

greece looks to ease demand. german bonds are crushed. yields surge. oil and saudi arabia. what will be the new normal for opec? good morning, everyone. this is "bloomberg surveillance." we are live from new york. joining me, olivia sterns. do we have some headlines? let's take a look at time warner cable. olivia: the numbers on the revenue side of the topline appear to be coming in a little bit shy of analysts'estimates. the bottom line is also a miss. we are going to speak to our licks sherman, the expert on the subject. tom: a banner just came out. a 90-day nightmare with comcast. olivia: we will speak with alex sherman about time warner