francine: the slump hits bp. output rises. manus: a secret recording of merges as jan is varoufakis reveals details of his secret exit plan. francine: u.k. growth figures are set to show the economy bounce back after a week start to the year. we get the q2 gdp data. ♪ francine: welcome to "the pulse."

i am francine lacqua. manus: i am manus cranny. we have a pack our. -- we had a packed hour. the world's largest maker of eyewear. we are going to be talking to the ceo. keep it here. manus: the extended slump in crude oil prices. bp announcing a fall and profit for the second quarter. the adjusted figure dropped from 3.6 billion euro -- $3.6 billion a year ago. manus: gas producer beat estimates, but that income was down to 7.2 billion. the companies president told brutal bloomberg -- told bloomberg there is more to come. >> what you can expect and short-term you see more supply

then demand in the market out there. pressure on the oil price. that is the situation that will remain for some time. we have indicated that by 2018, we should expect oil price around -- the shape and form of that development is something that is uncertain. francine: bloomberg's chief energy correspondent, harvey blas. have year, thank you for joining us. in terms of the earnings whatever learned? have year: the -- javier: the company is going to try to cut costs. it is lowering spending. [inaudible] it is going to be above $20 billion. i think management of bp is

giving maneuver. they haven't been down themselves to a number. if things continue, i think q3 and fourth quarter will be getting lower numbers. francine: -- manus: if we look at the dividend for the next couple of quarters, bp, of course is a slightly different story. they have a boost from trading. those things are the way. it is been hit on all sides. >> what bp's real agenda is to maintain growth and dividend. the other is to grow net assets. i endorse the company's reduction in. we'll see a shift from upstream

to downstream. francine: do you own bp shares? >> certainly. there are too many excellent companies to choose from. the dividend paying capability of bp -- it is not a great story. let's be clear. we anticipate that bp will be an underperformer. manus: y d continue to hold that stock? james: i only like the stocks, it is about trying to build a portfolio that is resilient and robust. if i am incorrect, we'll see economic recovery. we will look for economic violations to go up. >> i think there is more growth and story.

also, as a toil is benefiting from a country that is becoming problematic to every other european oil country. [indiscernible] i think the key question in libya is what any [indiscernible] is going to be doing later this week. investors are beginning to be worried. bear in mind, [indiscernible] any of the other european companies. manus: where are we in the whole debate between oil majors, the oil service companies and the projects -- we've got cancellation of orders. the whole debate change. james: i look at the challenge of sustainability. renewable sufficiency drive. the expectation of storage

capacity. in terms of economics. a company that is very well placed. otherwise, i would anticipate that one would wouldn't -- would need to look at the chevron's of the world. companies on the forefront in terms of driving value. i think shareholders should be focused in terms of trying to understand where value is coming from. the company is pressing all the right buttons to drive long-term value. francine: on the back of that we have bg we are expected shell next week. that is a cost-cutting exercise. javier: from now on let us not forget exxon and chevron on friday. investors are can be focusing on the numbers and the guidance on

cost setting. it is becoming operational performance. can they cut costs on operations tackle can they cut costs on operate -- can they cut costs on operations? francine: how much you save a big clips? i'm sure my boss is looking into it. -- save on paper clips? i'm sure my boss is looking into it. manus: what else is on our radar. trading in china. the shanghai composite closed 1.68%. rebounding into positive territory. index stocks more than a percent yesterday. francine: volkswagen have just volkswagen has surpassed -- it puts the company on track to capture the worldwide sales

three years ahead of target. it sold 5.2 million vehicles. manus: greece is set to begin talks with its creditors. technical experts and the -- experts from ecb are in athens. the talks come after varoufakis revealing details about a greek exit plan. francine: the economy bouncing back after a week start to the year. gross the mystic product is expected to have increased by 0.7%. the acceleration growth is expected -- interest rate after mark carney said the u.k. is moving closer to a hike. manus: we will be bringing those

in gdp numbers at 9:30. we will be discussing it with norman lamont. he will be joining us here in the studio. ♪

francine: welcome back to the pulse. where live on bloomberg tv. -- we are live on bloomberg tv. manus: that's given more on the

china situation. the stocks while today. shanghai composite falling 5% before closing down 1.7%. index closed yesterday. concerned that the government will have to prop up the shares. but i want to know is what you are thinking on china so far? we have a article on bloomberg.com saying shanghai stocks by replica of u.s. stocks 19 29. >> the problem with china is they have had this triple bubble. average earnings in shanghai. where the ratio of rebuilds have been way out of kilter. 22% more houses built then bought. oversupply and that willful. we have had masked credit

explosion. it does mean the debt ratios in china have ration -- have rates that were unsupportable. in terms of production capabilities, one of the reasons we have global inflation. those three bubbles will unwind. this is why i think there is a material difference to the u.s. in 1929. back in 1929, u.s. authority determined the correct spots -- correct response was to stay on the gold standard. this time we have central banks who clearly understand global markets. i think the pboc is populated by very competent staff who know what is going on. the giveback, the huge gains earlier in the year --

francine: it seems like the government and the pboc is managing the economy very well. yet the markets very badly. james: i think kress is the word one might use. francine: we see significant -- james: i am definitely not confident. china remains top of the pile. with that said, i think the government has made it clear that will sustain the economy. it has plenty of capacity. ultimately, markets will reflect economies. -- extra day. of depression. we will see recovery in the markets. manus: you heard it here first.

james: 2015 manus. francine: things can change quickly unfortunately. james is staying here, because we are talking about greece next. greece and its creditors meet today. talks come after another bombshell from former finance minister, yanis varoufakis. manus: he said his secret plan b. not so much a secret anymore. the idea was to sneak greece out of the euro on and investors conference call. i authorized it. -- >> i authorized it. >> they will not tell it. >> i know. even if they do, i will the night.

francine: he is saying that he would tonight, but we know that the call is recorded. he must've been aware of that. what has varoufakis said? >> that is such a great tape. it was shocking for many people to hear. his critics were outraged. varoufakis came out and said i wasn't doing my job. greece was under tremendous strain at that time. everything was hour to hour. i would've been remiss not to have had some sort of plan. he took a swipe at his creditors, saying you guys had also the -- all sorts of plans. how dare you criticize us for having a strategy in our back pocket as well? manus: tell us about what we can

expect a day. the creditors arrive. relations between the creditors and -- or the troika -- are anything but good. from the tape last night, there is an effort since desperate the inference -- the inference is they had a vice like grip. >> thanks started today with a disagreement over whether greece had implemented sufficient measures to begin this next round. we have seen again and again. we have officials in town today in athens. they're going to take a new picture of the greek economy. they need to get a sense of where we are today. after that, they will go over point by point to see what is needed. the clock starts ticking once again. they need to find 5 billion by

next month. they need some sort of band-aid. another short-term bridge loan. they have a lot of work cut out ahead for themselves. francine: andrew, thank you so much. that brings us to the twitter question, should greece hold on to varoufakis is plan b? over -- after all, we do not know what is going to happen next. manus: we like loaded guns, don't we? it is james bevans. before we started, i said to you it made sense. have a plan b. he knew he was being recorded. here it is coming back to roost. they should've had a plan b, should that? james: how can you possibly negotiate a position and you

don't have a fallback? i don't mind if i have to walk away. if i cannot walk away, i cannot actually negotiate. of course, that was necessary. as to what is going to happen next, we have negotiations on it to important issues -- on two important issues. positioning of workers, particularly issues the company's between the islands. this is been a political hot potato. the real challenge is what are we going to do with the huge debt burden greece still has and ultimately unsupportable. plan b has to remain in place. greece has to recognize even if it gets a short-term check by borrowing from people who already own them act. had you ever get enough to pay

back? francine: if you're going to -- if you're suggesting that eurozone officials need to prepare for a greek exit -- where is the biggest risk? how do you manage your portfolio? james: minor risk. it is only 2% gdp. it is only 1% of the broader gdp numbers. it is tiny compared to china which is huge in every sense. china is the maker for economic growth. it is painful for greece to be going through this. that's going through this period. it will be nothing like the calamity that would occur if china would go into a deep recession. francine: thank you so much.

he is back with more on u.k. gdp in 10 minutes. manus: we are going to be talking to one of the people who was on the conference call with yanis varoufakis. it is the former u.k. chancellor, norman lamont. francine: searching for answers. china's big search -- china's biggest search engine bid we have all of the details after the break. ♪

manus: welcome back to the pulse. streaming on francine: your tablet, phone at bloomberg.com. francine:china slowdown could be hitting fastest-growing tech businesses. caroline hyde has a breakdown. caroline: this is the chinese equivalent to google. it's got 94% of the market. let's break it down in terms of numbers. they are a big lackluster. -- they are a bit lackluster. growth -- 94% of all internet users in china. this is a search engine everybody uses in china. growth is not where everyone hoped it would be. up just a percent.

third-quarter forecast. we're going to keep apace. there is a bit of a selloff in the market. the economic slowdown is one area that people are questioning. whether that is weighing on the overall operability. this is a company investing. this is why you're seeing profits sink. this is like google. they don't want to be your internet search giant. they depend on advertisers. when you got amazon, ebay. think of this in the same way as china. china has out obama. -- china has alibaba. they are diversifying. they want to beginning in there and helping you get your digital wallet, paying using the likes of baidu. they want moving your eyes while

video streaming. this is why they are expanding their research and development. clearly this is a company that is splashing the cash. they are going to keep on building. their value is a seventh of google. manus: twitter is what everyone is going to be focused on. caroline: the shakeup that we have seen. can they turn the story around? first quarter, shares are down 34%. remember when they had their numbers? they want us profits would not be where they wanted. -- they warned us profits would not be where they wanted. up 54% in terms of sales. positive earnings. this is a company that has never made a profit. we start to see positive of it.

that's positive e -- positive ebitda. manus: up next, we're going to kick out the u.k. gdp.

francine: "the pulse." welcome back to "the pulse." -- will going back to "the pulse." manus: we have gdp numbers. francine: let's have a look at the pound. it is lower. it rebounded -- 155.45. it points -- manus: we've got is

a services and finance strengthening. that is its 10th straight quarter of expansion. it was plus .4% in the previous quarter. all is reasonably upbeat. that is the logs. -- that is the longest period of continuous growth since 2008. rob very good morning to you. this is good news from the political aspect. rob: as it continues to grow the conservative message is straightforward, look we can cut. the economy keeps growing. investment is coming back in. jeremy might disagree with some of that. that is driving growth. the long-term plan is working.

george should be prime minister by 2020. i may have skipped ahead. francine: or maybe not. james, you are a little bit more cautious. if you look at -- that is going to drive gdp. that is going to counter effect -- james: i think he is taking a huge gamble. the structure and function of the u.k. economy. there are a series of hotspots. we have not seen prices move up -- equally, i think we are still importing deflation. i believe where can have another month of deflation. import generally, we should not lose sight that global economic conditions are really tricky. there are going to be a lot of economies that see exports as

the way forward. we still have a very poorly structured economy. we still have people pouring money into the market. i would argue it is bad for the u.k. economy. i think in terms of bank of england we will not see a hike until february. there is a reasonable chance if there is a high, it will need to be reversed very shortly. manus: one of the credit rating agencies did report that the u.k. can't afford a rate hike. and will not necessarily go into arrears or default. it is not as bad a picture as some people would believe. >> this is unknown territory. i am old enough to have been reporting when rates fell to historic lows of 4%. everyone said good group -- good grief here it now we have rates

on the -- grief. now we have rates on the floor. what will happen when they go up. it is causing concern. the unknown quantity that households been doing reasonable things like paying mortgages. now are they living up to a new maximum? they don't know. they are worried about it. manus: you join the dots in terms of who is on fixed rate mortgages. i do think that the wholesale sector is disconnected from movement in q3. i am more concerned about the corporate sector. who would believe will be sitting here in july, saying that u.k. corpus sector --

francine: a possible reversal. what is the worst thing that the central bank can do?; i think it is important -- james: i think it's important -- do you lose credibility if you are unable to take action and get the economy moving in the right direction. if the bank does not raise rates , it has nowhere to hide. i think most people now believe -- it flounder's, unable to continue to qa. manus: does the fed run the same risk, hiking and then having to reverse? james: it should tighten what it needs to. francine: they argue it goes to the central bank or. -- the central banker.

james: none of these things are unidirectional. you will see 15 bits of movement and u.k. rates. not the traditional 25 or 50. fine-tuning. but it is about the need to demonstrate confidence in the economy. you might need to reverse thereafter. this is to me not an issue of household finance. i believe the household sector is in good health. there's a good chance it will get its tenure back. -- it's 10 year back. manus: flexibility and credibility is the name of the game for -- controversial as ever. thank you. francine: our other top

headlines, bp says it's profit tumbled 624%. dropped from -- statoil adjusted earnings of 27%. manus: greece begins talk with creditors. they are in athens to discuss policies. greece must admit in return for loans. the talks come a day after the recording emerged of former finance minister yanis varoufakis, revealing plans of a secret exit plan. francine: the biggest automaker -- it was the german company on track to capture the worldwide sales plan. toyota said today it sold 2 million in the month of june.

volkswagen's reported earlier this month. manus: hans nichols is a standing by in berlin. it comes down to the end, doesn't it? hans: also make a pun on who wants the national sales crown. the important thing is volkswagen has pulled ahead at the six month mark. there are 20,000 vehicles ahead of toyota. this is due to what is happening in europe. what is amazing, they have managed to pull in front based on the slowdown that is happening in china. volkswagen is much more exposed to china. take a look at numbers. you have toyota, they sell about a half million vehicles in china. volkswagen is up to 1.74. toyota is stronger in the states. volkswagen, marginally stronger in europe, where there is also

recovery. you see where the difference is made up. it has to do with the home market in japan. in japan, they have proposed a sales tax on vehicles. a tax that is hurt toyota in their home market. volkswagen is down 60% in the japanese -- is down 16% in the japanese market. we've got a midway point. it is not over until the race is over. as francine lexus a, -- as francine lexus aikes to say, it is not over -- manus: what safety you where? francine: we will be speaking to the company's co-ceo. stay with us. ♪

francine: "the pulse." welcome back to -- welcome back to "the pulse." the company's performance has been posting growth in emerging markets. china rising by 38%. a bloomberg exclusive.

thank you for joining us today. you had a very good first quarter. it was boosted by growth in the emerging markets. what does the second half look like? >> we had a good first quarter and second quarter. we're closing the second half -- the first half with growth. we expect to continue at that pace for the second semester as well. we have momentum. we are firing on all cylinders. francine: can you hold on to your margins? adil: yes we can. we can hold on to our margins. it is pretty uniform growth. we have bumps as well. we do not see any clouds on the horizon. francine: you said that you do not feel the impact on the business from the turmoil we saw in china. are you concerned that is what

-- are you concerned what you saw will spill over into the markets? adil: it is always a worry. i don't want to ask suggests that we are immune. china still very much and build mode. we closed the quarter with plus 48% growth. a big component of that is adding more coverage in the markets. as we are continuing to expand and bringing more in. that progress may mask any ups and downs that there may be from the financial markets, affecting the real economy. it is a $200 million business. we have huge opportunities to grow. francine: how much do you expect to expand in china you go if you

are not expecting anything sinister can you double sales in the next five to 10 years? adil: we have stated we want to double in the next 10 years. that would require a level of growth between seven and 8%. if you look degrees, it is the kind of growth we have had in the past five years. we should be up to do that in china in less than 10 years. i think that is achievable. francine: you are very confident about china. what about the rest of the emerging markets? i concerned that they may raise interest rates too soon? do think there is not that big of a link? adil: 75% of our business today

is north america and europe. emerging markets, when we project the size and the eyewear market, by 2020, emerging markets should be 40% of the world's consumption i wear. we are relative to the size of the opportunity. we have enormous gains. the size of the opportunity that we have their, and we are building infrastructure. we continue to open up new deals in the emerging markets. it is very big for us. we look at that as an opportunity that does not have any throwbacks. francine: are you concerned about foreign-exchange markets? what exactly does that mean you go are we hedging? adil: what it means is as the

market becomes more global, as e-commerce grows when there are very big currency swings, it creates an instability in our pricing globally. we would like to have within the pricing corridor but essentially our pricing comes more a global pricing. so every six months, we look at the prices and try to correct it . there have been this year particularly the euro versus dollars, we have made adjustments. we tend to look at euro as the base currency to make sure our pricing is more or less uniform. what it does is within the next

six months make our pricing in china more competitive. francine: talk to me about wearables. you are working with google and uintel. when are we going to do. that's the first fully wearable device that we can pose as i wear? adil: it is for our partners to declare. in 2016, you'll see the first commercially viable wearables appearing. the first generation of wearables were an experiment. they allowed everyone to adjust and the see the functionality that may be necessary in the future.

i'm a believer in wearables. the level of functionality will surprise many. we're working with our partners to make the devices comfortable. to apply what we know on the eyewear side to make sure that people want to wear them. francine: i am fascinated by this. you said you are a big believer. how much of your sales -- will be pricing? will it be the comfortability? the previous version of google glass could take video and pictures without people realizing it. adil: the first generation of google glass was an experiment. it's a question of when to draw the line.

there are many iterations of google glass. one of the big decisions is when are they ready in terms of functionality? it took six or seven years to go from smartphones two devices on your wrist. i think you will see a year from now on where you start seeing wearables. how many devices can people carry. i think it is important for wearables -- as we introduce them. francine: thank you so much for your time. it was a great pleasure to speak to you. up next, the demand for london homes. find out why? ♪

francine: welcome back to "the pulse." streaming on your tablet, phone and bloomberg.com. here are some bloomberg top headlines. the demand for construction slumped by 27% for second quarter. the chancellor george osborne heard sentiment that he raised -- demands have been dented affordability tax. developers used -- to help

secure construction. the recent merce outbreak is over. the first case was reported on may 20. cost thousands of tourists to cancel trips. the outbreak of the virus hit spending. president obama named if your as an outstanding partner. he says the country has played a key role in weakening the al-shabaab in somalia. the first ever visit by the u.s. president to the country. the company has reported a record second-quarter earnings. it is one of many companies reporting. manus? manus: those wearables in 2016. let's if you some of the other

stocks. bp, this is the lowest quickly profit for bp and almost 10 years. the stock is up 1%. profits up by 64%. is it the morning for shell exxon? we had that conversation with james bevans. it is not necessarily by the trajectory. there are other stocks -- yet trading and refining. the stock is trading higher. when it comes to statoil, 80 dollars oil that's $80 oil -- $80 oil. the dividend stays in check. m&a, not running to buy assets. profits fall by 27%. brent oil back in a bear market.

that a contentious issue. the lowest audience figures in terms of 15 years, they still have 21% of the market. luxottica, if you bought the stock up, you'll get wearables. there are so many devices you can have. they are going to change the pricing in china next year. rsa, this is the insurance company, we will see what price they may come in at. fran? francine: coming back, right here to look at the main stories we have coming for you in the next hour here it -- hour. we will be talking about china.

we will be talking about the u.k. gdp figures with norman lamont, who joins us here for an exclusive interview. we will talk to him about that controversial call with yanis fairfax. -- varoufakis. . .

manus: hit the earnings of b.p. output rises. francine: as troika talks start in greece, the secret recordings of varoufakis revealing details of a secret exit plan. manus: the u.k. economy grows at .7% in the second quarter after a weak start to the year. we'll be speaking with the former chancellor norman lamont later in the hour.

good morning our viewers in europe. good evening to those in asia and a warm welcome to those waking up in the united states of america. i'm manus cranny. francine: i'm francine lacqua. this is "the pulse" live from our european headquarters in london. manus: crude oil prices is having a major impact on earnings with b.p. the figure dropped to 1.3 billion from 3.6 billion a year ago. they posted their results this morning. norway's biggest oil and gas producer beat estimates but net income is down. the company's president told bloomberg that the global glut means there is more uncertainty to come. >> i think what you should expect going forward is -- more supplies than demand in the markets out there. pressure on the oil price and i think that is the situation that

will remain for sometime. we have indicated that by 2018 we should expect an oil price around -- but the shape and form of this development is something that is highly uncertain. francine: to discuss all of the oil majors neil atkinson is here. first let's speak to bloomberg's own crornte, javier. stat soil getting a lot more -- oil is getting a lot more growth. >> it has been able to -- production. we'll see how that -- production is increasing, cost cutting is working well. b.p. of course is having much problems with production is not growing. has been selling assets.

a good exercise, cutting costs. this quarter he was impact bade big writeoff. one of the main reasons why -- analysts estimate. manus: when we look at the oil market, i love what you wrote in your oil nodes this morning. that is fairly bearish statement. >> i don't think this is really a secret. looking at the fundamentals. supply demand numbers. ones put together by pretty much everybody else. it has shown there is a remorseless overhang of supply and demand in the market. we don't know the exact figure. we just know it is a lot. that has been showing up in physical stocks. it would take an enormous slump somewhere somewhere or a spike in demand for that picture to change. therefore, we heard the figure of $80 a barrel mentioned a

second ago. we may get to that but it ain't going to happen in 2016. at the moment we're looking down for the price rather than up. francine: how much down? if you look at china, i understand there is -- in the financial markets and that hasn't filtered through the real economy. do we know what is going on? >> even before the stock market problems in china, the rates of demand growth for oil has been lower this year than it has been in quite a few years. that is slightly to do with partial g.d.p. growth. essentially we have a situation where global oil demand is growing by 1.2, 1.3 million barrels a day, approximately. nearly all of that growth comes from the united states which is benefiting of course from lower prices for consumers. oil demand is growing strong in the u.s. plus a bit in china and one or two bits and pieces. that is it on the demand side.

the i.a. reduced down for 2016. they expect lower demand growth next year than we have seen this year. manus: everything is tying into what they have got to do. cut costs. we have heard that in the past couple of quarterly stories. statoil seems to be paying off. they are holding on to the dividends for the next quarter. but that strategy is beginning to work. my question is that the best strategy? and as that production comes out season will that put a floor underneath the price of oil in terms of these cap exprojects? >> if that is the only thing that is going to extend the dividends. whether it is going to work on not. cutting costs is going to bring more flexibility to stay in the dividend. if you look at it in three to four years time we don't know

where the oil production from the big oil companies is going to be coming from. that is going to be a problem. could sustain the price in the future. in two or three years, they are not going to have much production to grow. if prices r-do not recover, it is a big problem. >> you're absolutely right. there are only a handful of countries outside the opec countries where production is growing. one is the united states. the other is canada. brazil and one or two other countries as well. there is actually very little growth in the sect orr and that growth seems to be high cost. we're already seeing in the united states -- the production growth -- lack of investment partly because of sanctions and slow growth in the economy. it just isn't happening there. we're seeing in the united states, production is starting to tail off in a small way at the moment. that will continue. as javier is suggesting with

this lack of investment or cutback, we're seeing from all the other companies, it is entirely conceivable that this demand growth continues at 1.2, 1.3 million barrels a day and spend that two to three years time. we could be in a position where supply is starting to catch up with demand. francine: we have a slew of companies. who gets new contracts in libya and also who cuts spending? >> in terms of contract, two areas that we're going to be focusing very much is mexico where they have the opportunity to go. it didn't work very well. probably the smallest -- and the biggest staff comes in the next few weeks. we'll be focusing there and on iran. if anything opens, we have

earlier today breaking news that iranians are going to be holding a big investment conference for oil and gas and here in london, that is going to be another crucial point and in terms of capex, what i'm expecting is cut, curts and cuts. manus: are we in for a price war now? is that what we're looking at? >> iran is in the position from the beginning of 2016. it has estimated vared, 30 million barrels, whatever it is of oil sitting on ships. that oil could be released very quickly subject to quality checks and so forth. we don't know whether iran will dump everything quickly. they will want to export more. there is more coming from iraq and saudi arabia. we are going to be in a for a fight for market share. francine: guys, thanks so much.

manus: here is what else is on our radar this tuesday morning. volatile trading again in china. the shanghai composite closed down 1.7% after sinking as much as 5% and even rebounding into positive territory. the index dropped more than 8% yesterday. that was amid concerns the government efforts to prop up the shares are unsustainable. francine: volkswagen has purr passed toyota. it puts the german company three years ahead of its target. they sold 5.02 million vehicles in the six months through to june. manus: greece is set to begin talks with credit orrs about the country's -- technical experts from the e.c.b., i.m.f. and european commission are in aths

on the discuss policies greece must implement in return for loans. it comes after the secret recordings of yanis varoufakis revealing details of a secret exit plan. francine: g.d.p. increased by .7% and business services strengthened. the pickup in growth is expected to depule renewed speculation about interest rates after mark carney said the u.k. was moving closer to a mike. manus: we're going to be talking through those g.d.p. numbers. we have a man who knows oo thing or two about running a country's finances. he joins us at 10:30. it is not just u.k. economics he is going to be chatting about is it? francine: he was on a conference call with varoufakis. we'll quiz him about that as

well. keep it here on "the pulse."

francine: welcome to "the pulse" live from bloomberg's european headquarters here in london. greece and its creditors meet in athens today to hammer out reforms needed for a fourth bailout. yanis varoufakis shared his secret plan b to sneak greece out of the euro on an investor

conference call on july 16. >> i authorized it. you can't tell anyone that. >> the others listening, yes. they will not -- >> i know. i know. i know they are. >> i will deny i said it. francine: that's a pretty surreal conversation. what has varoufakis said since the comments were aired? >> that is such a great clip. the nice thing about varoufakis is you never really have to e.r.a. read between the lines. he is just so upfront about things. he came backswinging. he wrote this morning that something is roten in the eurozone and hideous restrictions on sovereignity. he came out last night and said you know i was just doing my job, emergency times call for

emergency measures. and the people would expect nothing less. what was nice is that it offered some insights into the war gaming that took place in greece not so long ago. and we're very much in the thick of it. it has yet to be seen whether these plans have been shelved or they are working on some other plan or who knows? but it was great, great insight. manus: tell us a little bit more about what we can expect in terms of creditors with the greek government because let's be fairly frank about it. this is not what you would call a harmonious relationship. it hasn't been. they are not going to be welcome with open arms are they? >> no. and you know to that point so we have creditor officials back in athens today. they are really starting a whole new -- a new round of talks. as you say it is all about trust and the creditors don't

trust greece and greece says, you know, we have done everything that you have asked of us. what more do you want? and as this latest round gets underway they are still having arguments over whether greece has done enough and whether greece is fighting back. they will figure out where they stand and then they have a lot of work in the next two weeks if greece is going to be able to -- it owes about 5 billion in august. francine: andrew, thanks so much for all of that. bloomberg's managing editor for international government. 10: 30, we're quite excited. we're going to speak to the former u.k. chancellor, norman lamont. manus: we're going to cover a variety of things. the telephone call was organized by lamont. we're going to get his thoughts. this is a former finance minister who knows a thing or

two about the challenges of the currency association. francine: that brings us to today's twitter question. should greece hold on to varoufakis' plan b? should the european officials be prepared for possible implementation of that plan b? we'll be discussing that next and be talking about the u.k. and g.d.p. figures released in the last hour. manus: absolutely. we're going to break down all the numbers straight after the 10:30 break .

manus: welcome back to "the pulse" live on bloomberg television, streaming on your ipad. for a little bit more context around these numbers we're going to bring in our correspondent, rob. this is a perfect fair wind as they would call it at home for george osborne. >> exactly. yes. this is -- these are numbers we were expecting. from a political point of view, it is four years. it is not like people are on tender hooks. happy days are here again. the torry message was the plan is working. they will have smiled when they saw these numbers come in.

francine: what does it mean for the bank of england? they continue -- firing on all cylinders it may come br before the raise of interest rates. >> they have to raise interest rates. i think they do. manus: the conversation we had last half-hour, they will have to raise them and then down again. >> i would not argue with james' expert knowledge from a -- an image management point of view, i think it would be problematic if they put them up and move them down. the whole message is steady hand on the tiller. at some point there is going to be a rate rise. as growth continues, that rate rise surely will come sooner. unarguably.

then there is this really interesting question. they will be reported in this building that never recovered a rate rise. there will be people out there watching this. there will be people whose mortgages, who just thought it was where mortgages are. i remember when 5% seemed very low. i remember thinking they will go up from five and now, you know, they are 1.10 of that. how will people cope? seevepb if you do this in small increments sort of .15% rise, how will people cope? will that be absorbed by the banks or passed on? this is unknowable stuff. manus: what do you make of the infighting going on in labour in terms of dissipated opposition?

>> it is going to be a highly entertaining july. that's what i make of it. when i was sitting here two, three months ago, we thought labour might win the election. how far have we come that not only did they not win the election, they might not win the election in 2020 is what a lot of people are saying. that is a gloomy forecast. 2020 is a long way away. at the moment they are having this leadership contest where they have got the two candidates that everyone was expecting who are the sort of the we have been doing this job a while safety first candidates. they have got the insurgent challenger which they thought was going to be liz kendall. we recall the blair-ite argument that they need to move to a

lower tax pro market solution. jeremy corbin got into the contest in the first place who is now sudden think leader. he is the 1983 candidate. which i don't think he would deny. that is when he was elected. i don't think many of his positions have changed. manus: rob, thank you very much. our political correspondent breaking it all down for us. francine: could be hitting its fast growing tech businesses. caroline hyde has a breakdown at the touch screen. caroline: i'm talking about baidu. the search engine in china. it dominates the market. 4% of internet users. they are looking outside their

usual calling. they are disappointed in its numbers. 629 million active users. double the amount of use hears the twitter has. this company is only in china. its second quarter profits not looking so good. growth staying at 38% growth. some are saying this is of course linked to the economic slowdown. let's have a quick look at where they are moving to. they are going outside to search in the same way that google has. we're looking at competition. alibaba, they are all fighting advertisers to come to their website. online to offline is where it is at. they are getting into the

digital wallets. you have video streaming. similar to moves in america in the fight for the competition. that really did hike up sales in terms of their costs. have a quick look at what else we're expecting. later today it is of course twitter, the company i'm comparing baidu to. they have about 300 million active user. they have a lot to prove since those profit and sales warnings back in the first quarter. this time, 50% sales growth is what we're expecting. a company that has never made a profit ebitda. who is going to be the c.e.o.? is it going to be jack dorsey? back to you. francine: up next -- manus: it is -- well, tezz the former u.k. chancellor. it is lord norman lamont.

stay with us for that exclusive interview. he was on the call with yanis varoufakis. what has he got to say? stay with us for that.

francine: welcome back to "the pulse" live from bloomberg's european headquarters in london. i'm francine lacqua. manus: and i'm manus cranny. here are some of the top headlines. b.p. said second quarter profit tumbled 54% after crude prices slumped. meanwhile norway's biggest producer statoil saw adjusted earnings fall 27%. francine: greece begins talks about the third bailout today.

they will discuss policies greece must implement in return for loans. varoufakis revealed details of a secret exit plan. manus: volkswagen has surpassed toyota in the first half of 2015. it puts the german company on track to capture -- three years ahead of its target. francine: 10: 31 london time. jonathan ferro has the latest. jonathan: thanks. the dax up .8%. gains on the periphery as well. 1.5% on the ftse. the ftse 100 creeping back slowly into the green for 2015. the ftse really under pressure. if you take the ftse 100 and break it down to the biggest five losers so far this year, it

is all mining and energy. when it comes to the commodity market it is brent back in bear market that generates that headline. down 20%. more than that from the highs hit back in may. a commodity route playing into a route for the mining and energy stocks. b.p. reporting earnings this morning. the drop second quarter profit 64% on a nine-day losing streak coming into the numbers. the stock getting a little bit of a relief this morning. in china, though, no such relief on the shanghai composite. down 8.5% yesterday and another 1.7% this morning. down as much as 5% at one point in today's trading. the volatility in china continues. a two-day drop of 10%. quite remarkable. i'm going to take you to the fks markets to wrap things up. -- fx markets to wrap things up. you can see the u.k. g.d.p. number.

where did it come out? guess where? right there. 0.7%. into positive territory. 1.5601 on cable. guys back to you. manus: thank you very much for wrapping all of that up. greece and its creditors are meeting in athens today for reforms needed for the third bailout. the talks come after another bombshell from yanis varoufakis. he shared his secret plan b to sneak greece out of the euro and as investors conference call on july 16. >> i authorize it. you can't tell anyone that. >> there are certainly others listening but they will not tell. i >> i know. i know. >> even if they do, i will deny i said it. manus: the former u.k. chancellor norman lamont was on

that call. he joins us now. welcome to this show. we played an excerpt from it. varoufakis was talking about his plan b. what did you make of that conversation and what would you like to say about it? >> this conference call was one of a series of conference calls organized by a think tank with which i am connected. three calls with people of different political persuasions about the greek situation. the varoufakis call was one of three. he outlined the plan that he has which had been described as a plan b to exit from the euro. it was nothing of the sort. it was a plan actually to create liquidity within the banking system of greece. were greece not able to agree to a deal with the e.u. it was a plan to actually keep the economy going. that is basically what it was. the suggestion that heff

planning secretly to leave the euro that is categorically not true. actually i put to him in the interview some people think he ought to have prepared for that and people said he couldn't. francine: i understand your point trying to address a possible liquidity problem. trying to turn tax interface into a payment system but his defense today said we knew about the plan b and at the same time in the conference call that we all listened to, he is clearly saying i will deny it if i'm asked about it. >> i don't quite know why he said that. the call was meant to be confidential. all but three calls. off the record briefing. that was all. but actually i think what he said on that conference call, he has said publicly and had said publicly elsewhere that but people had not really picked it up. manus: in terms of preparedness for the past six months, these

negotiations, volatile would be the understatement of 2015. would it not be logical that greece was making preparedness for liquidity, for an alternative currency to prepare for the worst? to me this is pure logic. >> well, i think it is logical too. it was a plan for liquidity. it was not a plan to leave the euro. there were two reasons they didn't do that. one, greek public opinion, however that may be to us sitting in london is emphatically not in favor of leaving the euro. greek public opinion has expressed that view again and again in opinion polls. secondly, i know that mr. varoufakis actually thought they were not -- he felt technically able to do this quickly and in an orderly way. it will be a dangerous thing for them to do. it would take a long period of

time and it would be rather like saying i'm going devalue the currency in a year's time and therefore they turned their minds against its. francine: how would you describe your relationship with mr. varoufakis? a friendship ored a vidor? you tried to go out for lunch. heff wearing a tie. do you think he is plotting a comeback? >> i don't know. he is someone who is a friend of mine. i know him as aen academic. i met him in australia and struck up a relationship with him and a friendship with him. i kept in touch. lo and behold he suddenly became finance minister. that is not what my relationship with him is based on. we met at a conference in australia several years ago. manus: do you think a they should hold to plan b? prepare. prepare for an exit should or could greece be in a better position if they actually exited

the euro? it is an extreme -- what was your opinion? what what will serve the greeks best? staying? >> it is a very hard call. it is not, as so many british commentasators say, like leaving the e.r.m. the question is would the undoubted short-term pain, which would enroll nationalizing the banks, continued capital controls and the mechanics introducing a new currency. probably a big rise in inflation. would that be offset by the longer term gains? i think that is a difficult call. i'm not surprised that they avoided that. i don't think that greece is through this thing. i have to say. i see a bumpy road ahead. the politicians have passed two sets of laws as i understandice

it but there is a lot more to of that to come. they may get legislation fatigue before the rest of the e.u. is completely satisfied. i think the degree of austerity is overdone. i think they have driven that economy into the ground and made it more difficult to repay their debt. francine: one last question about that conference call. do you think yanis varoufakis was aware that he was being taped and was he paid or compensated for it in any way? >> absolutely not. he was aware yes. francine: ok. norman lamont stays with us and we'll be talking about the u.k. g.d.p. next. ♪

francine: welcome back to "the pulse" live from london on bloomberg tv. let's get back to the u.k. g.d.p. figures. economic growth picked up in the second quarter with accelerating to 2.7%. lord lamont, thank you so much for sticking around. give us a sense of how you read u.k. growth. it was 0.7%. households are spending a little bit more than maybe we were expecting six months ago and they can counter the austerity

measures and keep the recovery on track. is that fair? >> yes. they thought there would be a bit of an upturn. there seems to have been an increase in production industries of about 1%. construction didn't increase but construction i think is doing pretty well in this country anyway. i think we're possibly on track for higher growth than the chancellor predicted for the year. that happened last year. it might happen again. but of course the unexpected always happens. one never knows. manus: the unexpected actually could fall from china. what do you make of the situation going on there? >> well i hasten to emphasize i'm not a chinese expert but i am rather worried about what is going on in china. the question is whether the sharp falls in the stock market will rebound on obviously other

asset prices and domestic consumption just at a time when policy in china is to move away from investment-led growth to more consumption oriented economy. if this slide continues, you might find that consumption takes a big hit indeed. i do think -- again -- manus: could that be the unknown for us that could knock our growth trajectory off? >> well, it could have an effect on world growth. rnk this along with the euro are two of the big uncertainties. we're not out of the woods. francine: if you're looking at the eurozone and a greece that may still use this plan tpwhanch you were talking with mr. varoufakis on july 16, if you look at china and the uncertainty is huge. the u.s. the interest rate environment is still a little bit uncertain although they will likely hike this year. what do you do? >> i think if it all goes well,

i think we'll see a u.s. rate nike the autumn and then the bank of england sometime early next year. what happens next year of course we may see inflation? things are going well that might result in consumption rising less. because what we're seeing at the moment is wages overtaking inflation. who knows. manus: one of the things that mark carney has said is when we start to hike -- the trajectory. the rate of rate hikes is not going to be anything like what we have seen before. to get back to somewhere, halfway to historic averages. those kind of comments from the bank of england, governor, given the past eight years krks we trust those in terms of the trajectory when liftoff comes? >> well i would make a similar forecast.

i would be not wholly kft. but i would go along with really what he is saying. i think the important thing to remember is when rate goes up it is a sign we're getting back to normality. people hate rates going up but actually we would be comforted to know we are back to a more normal situation. it is like the new normal, 2%. that is question. i think obviously central bankers are very cautious about putting rates up because of the overhang of debt. because of the precarious situation that households are in. we don't want to tip the whole thing back into the situation we were in before. but rates going up this is how you're getting back to normality. francine: yet the rest of the world is not at all back to normality. is that a dangerous game? you still have uncertain productivity. have the pound risking going higher. wage growth a little bit stronger but not in every

sector. >> well, sorry, i'm not sure what the question is. francine: the question is what is your biggest concern? the u.k. economy, we're firing on all cylinders. the projection of growth is steady and on the upwards trajectory. there remain so many unknowns. what would be your biggest concern? >> my biggest concerns are the eurozone, china, will it weaken actually export more. the potential weakness is we don't have much export-led growth. when you compare us with some of the eurozone countries who squeezed their economies extremely hard. even countries like spain are now moving in to balance on their current account. obviously the germans and the dutch have huge surpluses. we are continuing to finance our deficit. manus: one last question on productivity.

nobody really has the answer. if you have a little advice to your chum, george osborne. the biggest policy he could enact to deliver some productivity growth? >> i think the productivity conundrum is probably just a consequence of the crisis we have been through. it is the other side of the very moderate wage growth that we have had. people have been very mod nest the wage demands they have made. we have therefore maintained full employment. it is part of flexibility of the u.k. market. i think we may see productivity improve now that we have come out of that phase. actually i think the influence that politicians have on productivity is quite minimal. entrepreneurs have an impact on productivity. someone sitting in white hall has little influence on productivity.

francine: they can always give incentives. thank you so much norman lamont, for joining furs an exclusive interview today. manus: let's get you up to speed with other top headlines. demand for london homes up 27%. the duty was raised for luxury homes in december. it is worrying developers because they use down payment income to help secure construction finance. francine: south korea has announced the recent mers outbreak is over. it hurt economic growth and caused thousands of foreign tourists to cancel trips.

manus: president obama has praised ethiopia as an outstanding partner in the fight against militant islamics. they played a key role in weakening the al shabad group. before arriving in ethiopia obama was in kenya, a country fast becoming the start-up beacon for the rest of africa. bloomberg spoke to the ihub trustee about kenya's startup scene. >> we are in nairobi kenya. we are on the first floor of the four-story building that contains the ihub nairobi's innovation hub.

what it provides is a chance for an entrepreneur, someone who has just finished college and is still trying to figure out how can they apply their technical skills who can they collaborate with to make this a reality to have that first prototype. actually i think it is an important example of a company that spun off from tahiti and is part of this ecosystem that grew if a very small team. it is a redesign of the router for emerging markets. one of the key questions we asked ourselves then is why do we use technology made in new york or elsewhere when we live in nairobi and here we often have to deal with power blackouts. fully designed in kenya and we have a great team here working towards scaling that.

it has already shipped to 54 countries. it is really showing that there is a frontier around hardware and software. we have got different incubators that support startups in the logistics space and entertainment and financial services or financial teches and also an emerging space is startups in the hardware industry. what is needed now is just an acknowledgment of the importance of being places like -- the contribution of the i.c.t. sector stands at 8.4% now. i do expect that to grow. plain and simple, the importance of ecosystems like this is to create startups that then create jobs that create value and give back to the economy and

influence the g.d.p. francine: up next on "the pulse," what to watch. we're following twitter of course, the social media company posts its latest update. ♪

manus: welcome back to "the pulse." we're on bloomberg television, streaming on the ipad and

bloomberg.com. hans, the question is twitter. hans: there is a lot i could do with that but i should probably do that off air. twitter reported earnings after the close, the expectations are for 481 million in revenues. the key number is how many monthly average users they have. 300 million. we'll be looking at the c.e.o. who is going to lead this country? is it a ding or a dong? francine: very clever. hans, thank you so much. there you go. we just love the ding. keep it here on bloomberg tv. stay tuned for the "surveillance" team from new york.

the twitter question, should greece hold on to a varoufakis plan b? manus: we're hash tag "the pulse" you are? francine: flacqua. ♪

announcer: this is "bloomberg surveillance." tom: oil the sens as vladimir putin must consider a newly weakened russian ruble. security regulators look to

"prevent systemic risk" and china. and the failure of american retirement policy. here is a tip -- save more. good morning, everyone. this is "bloomberg surveillance ." it is tuesday, july 28. i am tom keene with vonnie quinn and brendan greeley. an important bloomberg story on donald trump, that he may not be worth $10 billion. it is viral on twitter. brendan: i value my brand at $3 billion. i value my brand. tom: there is a distinction. the intangible value of donald trump. you can see it out with bloomberg politics on twitter, a very careful accounting of what mr. trump is -- i think that is in our top headlines. here's vonnie quinn. vonnie: we started china.