francine: the oil giant announces that it is to shed 6000 jobs. manus: deutsche bank profit jumps. second-quarter net income more than triples. john cryan presses ahead with a turnaround plan. francine: yellen keeps markets guessing about when the rate rise might finally come. welcome to "the pulse" live from bloomberg's european headquarters in london. manus: we have got some big

interviews coming up over the next couple hours. have ago. francine: we have a lot of earnings. descalzi,o, claudio about 10 minutes from now. accor's ceo will talk to us at about 10:30. stay tuned for all of this. manus: shell is cutting 6.5 thousand jobs, reducing investment by $7 billion. this comes as the slump in crude oil prices continues to take its toll. francine: the company is planning for a prolonged downturn despite an earnings beat, reporting a second-quarter profit of $3.8 billion. what the oilws price is going to be. it will depend on how demand will grow for oil, how supply

will shrink. run, weve in the long will see oil prices back into the $70 and $90 range. manus: let's speak to bloomberg's chief energy correspondent, javier blas. protecting the dividend, cuts, what did you make? have you: -- main take away is a change of language. three months ago, it was about going back to $90 in three years. now they say, today's oil price will last for several years. it is a significant change in tone and language. that has been reflected in the actions they are taking. they are firing people. they are reducing investment. the dividend needs to be safe. that is what the ceo is trying to say. probably we got too excited

about the return to higher oil prices. to makeaking measures sure we continue to reward investors. francine: is this a positive or negative for shell? it seems they are aligning them selves to the other majors. javier: i think it is a positive. the reaction of the market has been very good. i think the company needed to react. the investors were unhappy at the strategy the company was taking. the language the company used was misunderstood by the market. the company didn't think carefully what it was about to say. company is trying to reset the relationship with shareholders and make sure that the language is more in line with what investors want to see. manus: let's talk about eni. profitability falls, but production rises. we saw total deliver in

production yesterday. eni has always been a very good explorer. other companies prefer to buy production assets and develop. they have a very good exposure to africa, to the noise oil -- to the new oil provinces. the big problem is the turnaround. they continue to disappoint. the claudio descalzi future lies on where he is able to turn that company around. francine: that is a very fair way of looking at it. back to shell. tomorrow, we hear from bg group. we heard the ceo defending himself, saying it was perfect timing. javier: you look at the two companies, they tried to put together that bill so many times. is the price right?

if you look at what the probably ity today, looks a little bit on the expensive side. manus: he said the deal was worth doing at any price. francine: he made the deal. manus: i suppose he's got to defend it. i'm sure you will be back tomorrow. javier blas. francine: back later. manus: there you go. javier blas. francine: that brings us to today's twitter question. should all ceo's prepare for a prolonged downturn? that goes back to a deeper question of, do you need to be in these markets where we are seeing growth around the world just a little more careful, not calling it a done deal just yet? manus: they are cutting costs. that is the first thing the oil companies are doing. lower energy costs have an impact for everybody.

here's a look at what else is on our radar. deutsche bank says second-quarter profit more than fell.d after its tax bill 796income came in at million euros. co-chief executive john cryan who replaced anshu jain is pressing ahead with the bank's plan to bolster profitability. has posted a second-quarter profit. net income came in at 293 million pounds. the ceo is selling assets and cutting thousands of jobs to return the bank to annual profit. manus: bnp paribas is considering a reorganization of its securities unit. that may bring the deepest cost cuts and's the financial crisis. france's largest bank has enlisted olivia weinman and boston consulting group.

lufthansa says first-half profits more than doubled. the group benefited from lower fuel cost during the six months. lufthansa also saw its passenger airlines improve since the start of the summer season. manus: facebook has better than expected sales. revenue rose almost 40% in the last quarter to just over $4 billion. increased hiring an investment on mobile apps sent costss surging. francine: samsung has signaled that price cuts for its smartphones to combat a market slowdown and surging sales of the iphone. the company posted a fifth consecutive quarter of profit declines. manus: the dollar is set for its biggest monthly gain since march after the fed indicated as barriers for interest rates rise, they are getting smaller. the u.s. stocks also extended

gains as the fed said the economic outlook and the jobs market are both improving. francine: strategists believe there could be a move as soon as september. we are joined by citi's head of international rate strategy. great to have you on the program. when you look at what janet yellen said, the market interpreted as, we don't really know. it looks like we will have an interest rate hike this year. is it looking like september? >> there is a chance priced into the markets for a rate hike in september. we assign a high probability to that. the fed has changed its language towards more hawkish stance. manus: the one word everybody seems to be obsessing over is some. they want to see some more improvement in the jobs market.

there's two more jobs reports between now and september. is that what you are focused on? alessandro: we don't really care about the number of jobs being added. there's an average of 210,000 this year. what matters is, do we see wage inflation rising, yes or no? that is the key point for the fed. francine: when you say higher, you believe it will happen in september. do you think it is a done deal for september unless we have some downside in terms of wage growth? alessandro: its not only due to domestic factors. this could come from the international front. if we had further decline in energy components, in commodity prices, perhaps the fed may change its long-held tradition of seeing energy components as being transitory. -- someet's talk about

people are saying, pulling the trigger is a done deal for 2015 whether they go in september or december. what matters the most in 2016 is how weekly -- how quickly they ratchet up the hikes. if we look at what the fed says, they say 1.6% in 2016. the market is pricing in something a little bit less. the market is more dovish than the fed. who has to right size themselves? alessandro: i think the market is taking a very cautious view. they are basically saying it is not going to happen like 2004 and 2005. i think the market is also taking the view that the terminal rate, the equilibrium rate at which the fed will settle, is much lower due to the fact that we have much lower real natural rate interest.

francine: we had a guest on this week, a quite well-known strategist, and he was saying there's a big chance that if they raise too soon, they may reverse but that is ok. dangerthink there is a if the data comes in a little soft, if the situation worsens in china, that if they raise too soon they may have to do a reversal? alessandro: a policy error is always in the cards, but this is why the fed is taking its time. they don't want to overturn it. they don't want to do it too early. they want to see whether there is a risk of external developments affecting their decision. manus: one of our editors said the biggest threat to the fed is that china essentially is doing quantitative easing by supporting the stock market and china could begin to sell dollars. that potentially is one of the

biggest unknown threats to fed policy. what do you think of that? alessandro: what else is a reserve currency apart from the dollar? the euro, maybe? it is very unlikely to see a big shift in reserve currency compositions. you've got to take a view that the dollar will remain a reserve currency for the central banks and it won't change that fast. francine: thank you so much. alessandra 10 tory. italy's largest oil producer eni has followed the trend of other companies reporting a drop in second-quarter profits. we can now speak to the company's chief executive, claudio descalzi on the phone from rome. thank you for joining us. you are refining your marketing unit to boost profit on the group level. you say that you are concerned about structural headwinds in the european refining sector.

how long will this last? , thank you very much. pleased with our result. we transformed the company and i think the result we presented this morning with an increase of production at 9%, the highest growth rate since the early 2000's, is a very important achievement. chemicals are positive for the second quarter. [indiscernible] i think that that is very important. that is due to the big transformation and restructuring we have done, especially on the takingide and also

the best segment. the results are very important. the more important point, despite the 50% reduction in the oil price, in the first half of this year, we generated the same amount of cash flow in the first half of 2014. that sounded almost all our capex. the level of $60 or less than $60 per barrel is a very important achievement that shows how much eni is resilient. francine: shell this morning saying it is preparing for a prolonged downturn. you seem to have done that six months ago. you were one of the first ones to cut costs at the expense of the dividend. do you now feel vindicated? mr. descalzi: i don't look at that. asust look at our result

very impressive and i think that we made the right move in restructuring and cutting our dividends. now we can confirm without any problems. [indiscernible] i think we are on the right way to reach a good result by the end of the year. another point that i might stress, in a year where everybody cut cost and we cut cost, we reduce our cost. we were out to increase our production by 10%. that is a historical number for us. we are quite happy about what is happening. francine: despite the very difficult environment, you've managed to kind of look at the pitfalls. when do you expect this

concerning environment to get better? of, youalzi: in terms are talking about price and the focus with the price? economics and our plan of restructuring, considering a low oil price. [indiscernible] [no audio] francine: unfortunately, i think we lost mr. descalzi. we were about to talk about some of the assets that they may have to sell off or at least restructure in other parts of the world. we will try to get back with claudio descalzi shortly on the phone. went: he said that they first. do you feel vindicated?

he says, i don't feel vindicated. he said, we went first, it was the right move, and it gives them freedom. francine: up next, how facebook's spending spree overshadowed strong revenue growth. ♪

francine: welcome back to "the pulse."

we are live on bloomberg tv and radio. manus: facebook reported their earnings and the social network has continued to grow in users and revenue. profits took a tumble following a sharp increase in cost. the revenue numbers versus the expenditure. caroline hyde has the breakdown. caroline: it was a beat looking at most of the metrics. we are seeing stellar growth in terms of sales and the amount of people joining facebook. sales up 39%. we've seen quarterly revenue above $4 billion. active users up 13%. billionnow close to 1.5 users on facebook. more than half of those connected to the internet are using a facebook app of some sort. some of these facts are pretty stunning. on average, a person is using facebook for three quarters of

an hour per day. that is pretty phenomenal in my mind. in the u.s., if you are a mobile user, one out of every five minutes on your mobile, you are using a facebook app. this is when you see the scale, the presence of facebook. they are also hiking up research and development and spending. we were warned about this by mark zuckerberg. he said 12 months ago, we will be ramping up hours ending. this is where the money is going. that spending is double the sales growth. the forecast is slightly down on that's ending. -- on that spending. still, it is a hiccup. i think the reason is because of the rampant growth in the share price over the last ask months, 12 months. we've seen shares up about 60%. this is the fastest company in

the u.s. to reach a market valuation of a quarter trillion dollars. this is a company on the rise. but what about the future? patience is what mark zuckerberg is asking for. i think investors are going to listen. he asked for patience before. everyone wanted more advertising on the facebook page. they wanted banners. they wanted you to be getting the companies hitting the marketing. he felt you needed it to come more naturally. you needed businesses to set up a facebook profile and allow people to start liking them. instagram,whatsapp, he wants to do it correctly. give him time, he says. he's going to focus first on expanding the business. 800 million already on whatsapp. 300 million on instagram. twitter has 300 million for its entire platform.

we are going to have to say, look, don't just focus on the u.s. and europe anymore. most of your users are internationally speaking. manus: well done, caroline. francine: let's talk again to the eni chief executive, claudio descalzi. we had a technical problem. we talked a little bit about your earnings. you were telling us you started the process of becoming leaner six months ago. maybe that is something a lot of oil companies need to go through. i want to ask you about one of the biggest concerns. saipan. how do you plan to turn that around? mr. descalzi: i think the new management at saipan is doing very well. they started with the right steps, with a very strong cost efficiency. impressive very

presentation. then we wait on september when they are asked to present the business plan. i think they started in the right way. to be leaner is to be more focused on the best segment to past up completely the standing. i believe that saipan is one of coveringger ones, onshore construction. they show strong competence. saipem is athat concern for us. saipem is an opportunity. i'm happy about what they are doing now. francine: you also have a right off on the libyan assets. do you think that is something you will have to do in the future? aipem, fromi: for s

our point of view, the main objective for us is to consolidate the debt. be our future. i cannot make any additional comment on that. debt is our target. francine: talk to me a little about iran. you seem to be one of the companies most interested in getting into the country. have you had any discussions? mr. descalzi: we start our discussion with iran, but we are really more discussing about the that we have issue to look over from the past project. that has been mainly the discussion we have with iran. it is a big country.

very interesting. but we need to wait for two main points. one is to understand effectively when the country will be listed. the second, what about the country? [indiscernible] if there is the ability to have a different contract, closer to what we have in other countries, we will be ready to think about new initiatives. francine: great to have you on the program. thank you so much for joining us, claudio descalzi. manus: great discussion, francine. it all comes down to your contract. great interview. up next, gains for spain. highesttry grows at the phase in eight years. francine: just a reminder, you

can follow us on twitter. one of the main things that we will be talking about today is the fed. the dollar set for the biggest monthly gain. is the currency right? ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.

it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. welcome back to "the pulse" in london. manus: here's our top headlines. shell plans to cut 6.5 thousand jobs this year and reduce capital investment by $7 billion. second-quarter adjusted profit dropped to $3.8 billion from more than $6 billion a year earlier. the jump in -- the drop in oil prices has cost shall to reduce spending. francine: bnp paribas is

considering a reorganization. that may bring the deepest cost cuts and the financial crisis. they have enlisted a consulting group to work on the revamp. manus: deutsche bank's second-quarter profit more than tripled. net income was 796 million euros, up from 237 million euros a year earlier. co-chief executive john cryan, who replaced anshu jain, is pressing ahead for the thanks turnaround plan. hans nichols in berlin, what did we learn from these numbers? hans: deutsche bank has a little more breathing room. they did well on trading of debt and fixed income. equities income was up almost 40%. income did come in three times bigger than it was last year year on year, but that is a little off. you look at their overall

litigation expenses this quarter, those came in at 1.2 billion euros. took all this together and said, we have a lot more work to do. here's what he said when he was speaking. our challenges are also evident in the unacceptable high level of our cost, our continuing burden of heavy litigation charges, a balance sheet that must be more efficient, and core overall returns to our shareholders. if i'm an employee at deutsche bank, my job is potentially endanger. jain was a big push by mr. as part of his strategy review. two months into that review, he was out the door. mr. cryan saying he will unveil his later this fall. we may get a sneak peek this

afternoon. manus: thank you very much. hans nichols covering deutsche bank. we heard from bnp paribas this morning. the french lender reports earnings tomorrow, but we've got a scoop. they are, we understand, to announce a massive revamping. caroline connan is standing by in paris. caroline: that is a bloomberg exclusive. to three people with knowledge of the matter, bnp paribas is looking at reviewing its securities unit. they are looking to make the fixed income activities more efficient, more cost-effective. according to our sources, the target for cost-cutting in the cid business may be as much as 20% by 2019. if you base this on 2014

expenses, that may represent as much as 1.2 billion euros. that would come on top of what we've already seen at bnp paribas. they've already done about one billion euros of savings between 2010 and 2013. this is due to the increasing capital requirements, the tougher capital rules. especially in fixed income and equities. other banks in europe are doing the same. we've seen barclays also looking at this. if you look at the share price of bnp paribas, it has increased about 15% is the beginning of this year, but it has underperformed the banking european index of bloomberg. we will get earnings from bnp paribas tomorrow morning. the question i will be asking the cfo tomorrow morning on

bloomberg. francine: caroline connan there. bnp paribas shares up 0.4%. manus: let's turn our attention to spain. the economy has raced ahead in the second quarter. gdp rose 1% in the previous quarter and 3.1% on an annualized basis. francine: let's get more on that with maria in madrid. another quarter of solid growth. what is driving this? maria: another quarter of strong growth in spain, 1% for the quarter, 3.1% for the year. we didn't get a detailed breakdown today, but data points are recovered that that is now driven by internal demand. fallen andyment has there's been an election year. the government has cut taxes twice this year. all this coming together to make

people go out and spend money. a year ago, we would have been talking about export. the nature of the recovery has now shifted to internal demand. manus: it is an election year. i think what we've got here is, how does this pay off? you got the best growth in eight years. employment growth at 22%. is faster growth enough to save him? maria: at this point, getting the economy right is incredibly important. that's all the ammunition he's got. the government has been hit by corruption allegations. it is crucial for rajoy to get the economy going before the election. the risk for him is that he will win but not with a big enough majority so there is a coalition to kick him out. the only way to avoid the situation for him is the

economy. it is important for him to get it right. francine: maria, thank you so much. manus: up next, facebook. sales topped out on estimates, but why did the share price fall in extended trading? what has zuckerberg to do to continue? ♪

francine: welcome back to "the pulse." manus: here are some of our top headlines. malaysia airlines has the australian government saying it is too early to know whether the debris washed up on the island of madagascar are is from the missing flight. officials are examining photos of what appears to be some of the wing. some analysts say it could be from a boeing 777. the french government has promised to send police reinforcements to calais to break up migrant camps in response to a growing crisis. euro tunnel has appealed to the french and british government to intervene as people try to illegally and are the u.k. manus: christine lagarde says she's pleased that the fed is taking a data-dependent approach

to monetary policy. she spoke yesterday from washington. agarde: we have a strong performer with the united states of america which is well into its recovery process. we should expect a variation of monetary policy in the not too distant future. manus: that was christine lagarde. says the imf and the fed were not always on the same page. the imf has recommended the fed delay its first interest rate hike. francine: facebook's spending spree has overshadowed better-than-expected sales. revenue rose in the last quarter to just over $4 billion. however, increased hiring an investment in mobile apps and features sent costs surging. manus: for more, we are joined by ihs technology senior analyst , and also by the general

partner at bolton capital, a venture fund with more than $2 billion under management, and our very own caroline hyde. welcome to the show. let's deal with zuckerberg first of all. huge acquisitions. the core business is doing well. has he earned the right to be asking for patients in terms of what he's doing? >> i think absolutely. facebook has been extremely flexible and adaptable. in 2012, 100% of their revenue was coming from desktop. they have proved that they can be flexible and they can adapt to the times. they are expanding their video offerings area -- offerings. francine: will that be enough? >> at this stage, it is a huge opportunity. facebook continues to be a big

preceptor. advertising works extremely well. you look at the results. what you see over and over again is a country run by the founder, somebody who gets what he's doing. caroline: do you get the sense that a few people are wringing their hands about the amount the costs have surged? do you think this is profit taking? is there concern about how much they are pumping in to the company? >> i think they have a clear vision. zuckerberg mentioned the move from text to images, now to video, and further down, virtual reality. facebook is moving forward. they will invest. they are not going to stop costs rising. we expect to see more of that. it will pay off. think when you are moving so rapidly, investment is key.

you are going to see him keep doing that. you have to go back to three years ago when somebody asked a very simple question about the results. he said, give me time. i think we have to give him the same way again. francine: virtual reality. manus: you are obsessed with oculus. francine: i don't know if i like it or hate it. virtual reality, is it still because they want the hardware? i'm unsure of what this will become. is this really the next step to online advertising? >> i think online advertising is the key to everything in their strategy. their motto is, audience first, revenue later. they want to keep the audience by innovating. manus: what did you make of his youement, and i love this, don't really get interesting until you get a billion people on board. messenger is 700 million.

instagram has 300 million. whatsapp is 800 million. twitter only has 300 million. his twitter peaked? >> they are testing advertising on instagram as well. they are trying to get ad dollars from tv. in order to get scale, you have to have big audiences. >> absolutely. facebook or instagram, and it looks much more like what you see on television. it makes a lot of sense. twitter is a very different business. to compare them as like for like is probably a bit lazy. caroline: where is the next frontier? we've seen acquisitions, bold moves, billions spent on whatsapp and oculus. where do we think he will push the direction now?

i really think facebook looks at what they do as being the home of conversation. he will go to wherever people have conversations. today, that is on our cell phones. in the future, it will be virtual or augmented world. manus: you said it is lazy to compare facebook and twitter. i had a conversation with somebody who said that the difficulty for twitter is that on facebook, we've all met and you can all join me in my group. twitter is something which is rather more singular and harder to grow. what does twitter need to learn from facebook if it is a lazy comparison? >> i think it is not about functionality. it is about the company. we are huge believers in founder-led companies. founders get what they are doing. if you build a large company, you can do well by continuing to

back them. facebook has benefited from having this singular founder vision. the team that has managed to build itself around zuckerberg supports him in the areas where he wants supporting. you see that with audacious moves like instagram and whatsapp which now make perfect sense. twitter has struggled with its founding team. there are people who have come in, gone out. we haven't seen that singular vision. i think it will be interesting to see what happens. it doesn't have to be a founder. but in a fast-moving state like this, having someone who understood the story from day one is key. if twitter can get some of its founder mojo back, we will see interesting things. francine: do you agree with that? if you can monetize twitter, then you have communities or ,roups, reporting journalists

that are much more active than on facebook. people aren't necessarily as engaged. >> i think that is the key, the engagement. twitter has been great at snippets and niche communities. facebook has worked on engagement. they are doing partnerships with video companies. they are streaming some shows on their platform. they want to keep the user there. twitter is a five-minute place. facebook you mentioned was 46 minutes and average that every user spends on their website. caroline: you are getting three quarters of the revenue rum facebook from europe and north america. where should twitter be looking to go? >> this is part of the internet.org project. this is why zuckerberg is investing so hard in connecting everybody. the strategy has always been

audience first, revenue later. they are working on that. francine: what is your favorite company intech? we heard of military companies doing material that is the next step for virtual reality. wearable things? is it augmented reality? >> i think artificial intelligence is the most fascinating right now. if you look at that space, you are seeing a complete reconsideration of the fundamentals. you will see that being deployed in everything from financial services to virtual reality. francine: thank you to all of you. manus: up next, with oil in the bear market, we look at how saudi arabia is trying to diversify away from crude. ♪

francine: welcome back to "the pulse" live on bloomberg tv and radio. manus: let's return to the oil conversation now. the world's top exporter of the commodity, saudi arabia, around half of its gdp comes from crude. the imf says it should reduce its dependence on fossil fuels. francine: willem marx reports on

how the arab state is trying to diversify the economy. >> saudi arabia is abundant oil wells have built soaring skyscrapers and expensive shopping malls. but the era of oil dependence will eventually come to an end. some are racing to develop alternative economic drivers. >> diver subrogation away from oil is very important. >> rasheed is trying to create a new business model by famine sing the construction -- by financing the construction of a whole city from scratch. >> there is nothing like this in the world. this is the first $100 billion city. >> imagined here in a commercial video, they aim to profit by leasing land tech companies and industries. business professionals may one day populate these homes. for now, the construction workers building the city represent most of its residents.

whereoil-rich country government handouts support many citizens, it is sometimes difficult to encourage saudi's into the workforce. >> the government is now studying the case carefully to have good policy to start solar. he runs research for saudi's only solar manufacturing land and test field. he says the desert climate here is ideal for harnessing the sun's energy. despite government promises of industry expansion, his production line is still stuck making test panels. >> if the government policy allows solar to grow here, how much do you think it will grow? >> i suspect a dramatic increase. >> saudi oil revenues in 2014 topped $900 billion. in the past three decades, just $70 million has been spent on solar.

>> this was developed as a caravan for the desert. >> another growth area could detect. the countries top -- the country's top incubator. >> it is very easy to attract investors. our main interest is in countries with experience and expertise instead of all money. >> the business is incubated here as with everything in saudi arabia, easy access to capital does not guarantee economic success. on, we just got a nice bloomberg scoop. members of german chancellor angela merkel's coalition are looking to amend rules that ensure that private investors bear the brunt of insolvency by a member of state or currency union. we are talking greece and germany. manus: hans, what does this mean? hans: this gives you an

indication of what angela merkel will be up against when she brings that 86 billion euro bailout package to parliament for approval. there is a strong faction in her government that wants to rewrite the rules on how any bankruptcy would be sorted out. what we have here is a conservative member of angela merkel's party. he's leading the effort. they plan to introduce legislation. there's no certainty that merkel will take this up, but it does give you a sense on how they want to rewrite the rules and make it easier for states to reclaim their assets, their liabilities, and private investors to reclaim their's, and have some sort of process. this would involve a new court. we will come back with more details later. francine: thank you so much. hans nichols with the latest. manus: up next, if you are listening on the radio, "the

first word" is next. for our viewers, it is a second hour of "the pulse." we are talking to lufthansa, getting some news flow in terms of those headlines from germany. ♪

manus: shellshocked. announces its cutting 6500 jobs. francine: deutsche bank profits jump. presses ahead with the turnaround at -- turnaround plan. manus: the fed may raise rates. -- the flow continues with u.s. gdp later today. ♪ manus: good morning to our viewers in europe.

welcome if you're just wiki up in the united states. i am manus cranny. francine: i am francine lacqua. manus: coming up, we're going to talk to lufthansa cfo simon. francine: make sure you stay tuned to that. manus: it has been a huge morning for earnings. almost 70 have reported their numbers. let's take a look at some of the big ones on our radar. francine: shell says it plans to cut 6500 jobs. that second-quarter adjusted billion.opped $2.8 the slump has forced shell to reduce spending. manus: deutsche bank says it's profits tripled. the tax bill fell.

from 237 million euros seen earlier. he is pressing ahead with the bank possible plan to bolster profitability by cutting back businesses. posted a rds has second quarter profit. it came in at 293 million pounds. the ceo is selling assets and cutting thousands of jobs. lufthansa's first -- leptons is second quarter profit doubles. passengeralso saw airlines numbers improve at the start of the summer season. francine: facebook spending spree has overshadowed sales.

hiring andreased investing and mobile app, surging 82%. samsung -- combat a slowdown. a company posted a fifth consecutive quarter of decline. francine: we're joined by thomas moore. great to have you on the program. we will break down some of the individual stocks you're watching out for. it seems we are not getting a bad earnings crop. a lot of companies are focused on cost cutting. it is still a struggle. they seem a lot leaner. thomas: the key here is expectation started alone. point with valuations to get to a level where there was not a lot in the price. we are delighted with shell and

ashes in a cup. these are brilliant results. expectations were low enough that the stock prices were able to bound a couple of percents. manus: let's focus on shell. we've had a lot of the oils come through. when you talk about shell, the dividends are the holy grail. dividends sounding like? how do you look at the dividend story? thomas: i think it is important to talk about dividends. that are just that is what people are relying on. there are a number of large companies, including shell, where the gap between earnings and dividend is a shanking. the response to that has been savage cost-cutting. you see that when shell has cut its dividends. we see that with astrazeneca. it has been falling for five years. it's time these companies got the top line producing.

we're going to need to see that for the dividends to be sustainable. d go through industries? thomas: you need to stock take. -- you need to stock pick. those are seeing strong earnings and dividends. not based on improved economies. slothful income is picking up. oils are suffering. next stocksare the suffering. it is important to keep on top of that, but stock levels can throw off stock opportunities. manus: a debate about the fed and what they do and when we move on rates is ever present in the whole discussion. ready fors, are you the hiking mode echo -- mode?

thomas: our multiethnic team has been preparing. it is important we stay on top of that. the macro is still very mixed. we are seeing a good housing recovery. we're not seeing a pickup in retail spending. employment is picking up both sides of the atlantic. of course we are coming closer, our view is that there will be a rate hike in the second half of this year in the u.s., and that is coming. it is going to be gradual and limited. francine: a rate hike in the u k, -- thomas: rate hikes are going to be good news for banks. interest rates move ahead.

rds, weree a look at talking about a pickup in loan demand. from corporate. we are seeing manufacturing loan demand picking up. that is an indication that it is not just about here in london. it is not just about some of the sectors across the bubble. it is about the wider economic pickup that we are seeing. it is encouraging. manus: what are the other trends that are the savior of the market. people might be worried about china. the -- is itok at in pharma? is it in telecom? m&a.s: we are wary about of underlyingind

issues that some of these company's half. proactives for reasons rather than four defensive reasons. you have to separate these out. but companies have run out of growth and they might look to m&a four defensive reasons. we are much more keen on situations when there are revenue synergies and cost synergies. there,e: thomas more thomas -- thomas more there. benefited fromp lower fuel costs. it fell by 59 -- granted 9 -- it fell by 309 million euros. is simone menne. reward. numbers, a nice

some good news coming through here. well done on that. the second half is going to be more demanding. and you say operating profits are still achievable. says how cann me you stand by the 1.5 billion? we even say our guidance is more than 1.5 billion. i am confident that we can keep that. we had a good half year. fuel is helping a lot. interest is helping. is negative. general, in combination of it all, i am confident we can keep our guidance. manus: are we going to see a price war? is that we'll -- is that what we are building up toward? simone: i don't assume a price war. we will see price pressure.

there will be some competitive routes in our home market. we have with our new second cause your wings, a good -- euro wings, a good cost platform. we are ready to compete but we are partners. where is the toughest competition going to come? drop, issenior yield this the worst? is this the bottom? simone: we see the biggest on cologne starting to berlin. i don't assume this route will be negative. we see region by region and

everywhere is suffering. and euro we do not have these type of declines. be a't expect this will lot tougher, but there is pressure. one of the bruce has been the drop in the euro price. the boosts has been the drop in the euro price. your hedging much further forward when we are at the bear market point. are you going to change your hedging strategy? engineered ane engine -- we have engineered a hedging policy. we are prompting from lower fuel price, because we have policies. therefore, i am not locked in for a fixed price, so i am flexible.

we took advantage in our hedging strategy to have a little bit more with this system, so no change in our hedging system. we are very happy with it. we are profiting from lower fuel prices with it. manus: capacity. airlines are adding capacity. what are you going to do in the second half? the whole point about being up to react, you see an uplift and the start of the summer. .ou're going to add capacity and how are you going to split it out echo between continental and transit -- split it out? between continental and transatlantic? simone: i think the north american market is so healthy, because there is a lot of capacity discipline. we are quite stable in our flights. weare at capacity, because

with higherr fleet seats in the fleet. yes, there will be a capacity growth in the winter. it will go via all regions by the growth of the plane. no further growth. we try to stick to some discipline here. manus: interesting. tell me this. carriers, whoing can you learn the most from? who do you want to emulate the most? emirates, turkish. who is doing the better job -- who is doing a better job than you? think if we should fromte, we should learn

the asian carriers. we are well in comparison to turkish and emirates in our premium roddick's. -- premium products. some of the process we can learn, more from asian carriers then turkish or emirates. simon, thank you for joining us. cfo of lufthansa. francine: still had, shellshocked. the company announces job serving/. slashed.jobs are being is it the right strategy?

manus: welcome back to "the pulse." live at the bloomberg headquarters in london. francine: first-half profits rose. higher electricity demand and latin america. weaker sales in its home market. ceo francesca needs to raise 5 billion euros. [indiscernible]

in the next few weeks. it will engage in exclusive talks. >> i think the process is at the final stages. we have offers as we are speaking. -- we willcting engage in the final round's. we have constant contact with the government. tohave appointed advisers have through the decision-making process. they will undertake in the fall. [indiscernible] an assurance an option to buy the stakes. , or atthe future months the very end of the process. i think we will announce the

preferred [indiscernible] in the next weeks. and then proceed with the negotiations. francine: show has announced 62 500 jobs -- has announced its cutting 62 500 jobs. the covenant has warned that it is preparing desk the company has warned that it is preparing for the downturn. >> nobody really knows what the oil price is going to be. it will depend on how demand will grow for oil. how supply will shrink. we believe in the long run the demand will reestablish itself. we will see oil prices go back into the $90 range. francine: joining us, thomas moore.

javier blas is here. we've heard from the ceo. he is ready for any oil price. javier: we cannot rely on high oil prices. he admitted that his view on the oil markets has changed. wasaid maybe the language misinterpreted by the market. maybe he is a convert now for longer oil prices. artainly, he is returning for period of low prices. he is reducing the headcount. he is reducing investment for next year. briefly, test on this -- we touched on this briefly, he is dedicated -- when you look at shell and oil what are you looking at? thomas: if we're starting from

scratch, when a have this dividend policy. they are focusing their strategy around the dividend. you and not necessarily begin with. that being said, they have levers they can pull. they have abandoned their dividend. they abandoned that last year. they have read introduced that more recently. -- they have reintroduced that more recently. they can also manage capital. you have to ask yourself, is the dividend policy actually driving their strategy? if so, is that optional for shareholders? francine: we are good to show you live images, the price of oil affects everything. this is alexis tsipras addressing lawmakers in athens the government is at a crucial point.

they are facing a dilemma. we know everything that varoufakis has been writing about. going to come , back inhe troika athens. will those negotiations bring? -- what will those negotiations bring? gentlemen, you're still with us. this,, the dynamic is they all cut capital expenditure this week. the cuts that we are seeing come through from shell, do you get the feel that there is more to come? javier: i got the feeling there is more to come. the companies are beginning to cut some areas of their costs. shell ceo announced they're going to be cutting their budget. that is good news, because you

cut the budget very quickly and returned the money very quickly. -- this company is going to explore and they need to explore everything. they need to explore millions of dollars to discover oil. he was mentioning it is when we are going to realize [indiscernible] what is driving the strategy. if youe: will this work? prompted dividend, it does not look bad at all, especially when we have interest rates at that level? desktop -- thomas: if you look at cuts among companies yielding more than 6%, it is pretty a lamentable. when you're looking at yields, be very careful, because the yield is telling you something.

in the case of shell, we have earnings plunging toward dividends. this year it is unlikely they're going to be covering that dividend in cash. thispension fund holders, is a stock withheld across people's portfolios. francine: guys, thank you very much. that is also our question. should we be prepared for a long-term downturn? manus: facebook has reported their earnings. the social network has continued to grow. profit did take it tumble. we will look to break down the numbers. caroline hyde, this is the biggest criticism. he rather the cost, but he wants us to be patient. thesene: he warned that costs were going to ride.

whenare pretty phenomenal you look at statistics. timeross. for the first you saw more than $4 billion. active users as well still continues to grow. unlike twitter which is dilating. we saw 13% growth. one and a half billion users around the world. all have a connection to the internet. using facebook apps. , 46 minutes per time they log into facebook. that is a phenomenal statistic. in the united states, one out of every five minutes spent on facebook on a mobile at. -- mobile app. a hiring spring on research and develop it.

this is what they are plowing their funds into at the moment. they're going to rain that back slightly. be guestoing to there's going to be a 55% to 60% uptick in spending. what about the patients and share price? at the past month or so, we have seen a significant uptick in the amount of shares being bought. what about the patients? he is demanding patience when it comes to the monetization of the business. he wants to do this correctly here do not overwhelm us with advertising -- correctly. do not overwhelm us with advertising. the engine million on instagram. [no audio]

francine: "the pulse." welcome back to -- welcome back to "the pulse." manus: i am manus cranny here toe it shall says it plans cut 6500 jobs this year. second quarter adjusted profits drop to the $8 billion. 23 $.8 billion. paribas --np

is workingrgest bank on the rebound. that is according to three people with knowledge of the matter. spending spree's has overshadowed profits. it rose in the second quarter. surging 82%. is 10:31 london time. let's check in on the markets. green for a third day of gains across europe. in frankfurt on the dax with a high of .2%. what a busy day we've had across europe. the ftse 100 is higher. over 70 companies on the stoxx 600 reporting numbers this morning. to break them down, i will pick out one. lift the lid on the ftse 100.

the biggest gainer has been shell. she'll up 3.5%. the numbers speak. there were not really the headline. the headline came from the plan for the future. they are cutting 62 500 jobs. pre-committing to next year's dividends. lots of most going on in equities. lots of earning stories as well. and a commodity market, here is another story. goal down another 1%. -- gold down 1%. this was the starting off -- the swissie sounding off as well. stories are aet, stronger dollar. we go higher ahead of a big day. three hours away, it is u.s. gdp. that's determining if the fed

hike book -- determining if the rate hike will come in september or december. francine: 60 pick just 60% of economists expect a rate hike in -- 60% of economists expect a rate hike in september. manus: does bank says second quarter profits more than tripled. -- deutsche bank says second quarter profits more than tripled. let's get more with hans nichols. ishink what this says to me they are a trading bank. trading does well. that markets well. when theyo it, they do it really well. that is one way to put it. when you look at the numbers after that headline, that increased three times year-over-year. you look at what they did in currencies and commodities. 2.1 one billion

-- 2.11 billion. there are is some dark clouds. -- there is some dark clouds. john crane is bracing everyone for tough times. he says there are challenges ahead. let me read a quote. here's what he said in the earnings statement. our challenges are evident in the unacceptably high levels of cost are a continuing burden. a balance sheet that must be more efficient in the overall returns to our shareholders. there is a 1.2 billion charge on litigation before the estimates for that were for 500 50 million euros. the deutsche bank story is a lot like it was last quarter. -- four 550 million euros. we expectnow where job cuts.

the underlying numbers are not bad. this gives the new management team a little bit of breathing room. maybe some goodwill before he announces his big changes later in september and october. francine: hans nichols in berlin. let's bring you to athens. the great prime minister is having a momentous day. he is squaring off with party rebels. the outcome is this meeting, he is rejecting them -- he is addressing them at the moment. the outcome will decide if they hold elections are not. the group he is convening will have a vote by internal ballot. it will determine if they back the prime minister's deal with creditors or not. manus: he compromised a euro exit without support. it would bring more austerity. this is the line -- whoever thinks another 8:00 p.m. would do better, this is where it

touches -- whoever thinks another p.m. would do better, should say so. his party.enging job, nown do a better is the time to speak. youcine: the problem is if look at his party, about a quarter of his mp did not back that reform. the prime minister is giving a speech, the group that he is speaking to what decide whether to hold an emergency congress or internal ballot among the members. manus: for the whole issue with creditors. that makes it more perplexed. this is not the country that has the time. francine: he's the most popular

leader in europe. , becausell speculation we don't know if there will be elections. but we will watching very carefully. manus: up next, gains in spain. the economy grows at the fastest pace in eight years. we are good to find out after the break. ♪

francine: welcome back to "the pulse." manus: spain expanded the fastest pace in eight years. grows three point 1% on an annual basis. maria, another quarter of solid growth for spain. what is driving this? you said, another strong quarter here in spain. the economy is growing at the fastest pace in eight years. weht now, we are seeing didn't get a detailed breakdown of gdp components. the data has been driven by internal demand. it is important to keep in mind that unemployment is falling. also this is an election year, so the government has cut taxes. all of this coming together to make people go out and spend money. a year ago, we would've been talking about export. it seems the recovery has shift

into internal demand. manus: this is election year. you still have 22% unemployment. figures reallyh going to give them a boost toward the poles? -- toward the polls? maria: these elections are important for roy -- for the rajoy. it is all the ammunition he has. he is still leading. he would win by simple majority. the risk would be he get a very fragmented vote. he wouldsk would be get a very fragmented vote. francine: maria, thank you so much. joining us from madrid. manus: ichor saw its -- i court

accor.s firs cor ceo.ined by the aco -- is great to have you here on bloomberg. what is going to be the problem for the second half for you? what is going to be the simone: -- sebastien: the challenge is going to be able to transform a pretty low revenue base and to profit in france. a set of france and brazil, every thing is going smooth and fast. whether it is middle east, , as younorthern europe said on your peter's interview. we are doing fine. caution is on brazil alone. francine: what about strategy.

i know your time to buy up companies. is it more important to buy hotels? to grow? or is it more challenging for you to actually gain hold of these companies that add to your bookings? program.: we are in a i just joined the company a couple years ago. the semesters have been passing. every semester we have been showing double-digit growth, including last semester. for theo be the same second semester and next year. we are on track. the biggest challenge is not meeting the performed just. i know exactly what we are good to be doing. the challenge is how to adapt to the travel industry. and how to be as innovative as airbnb. we all that to our clients. we need to add that debtor and

faster -- we need to a debt better and faster. adapt better and faster. disruptors --ging what is the most radical thought you had as the new ceo? how can you take your model and disrupt the disruptor? sebastien: you are correct. we need to be an actor. the number oneo marketplace, we decided that we are good to be disputing -- independent hotels will be benefiting micro-distribution. atber two, let's look airbnb. it is a very strong model. it provides a local experience to international guests. their visit when

they go to airbnb. why can't we do the same in the hotel industry? of course we can. through the couple hundred employees we have, let's get this interaction between future guests and employees in a much more local experience to make it more likely. just listen to what has worked elsewhere and incorporated in my system. francine: what about for exchange? sebastien: foreign exchange is for the first semester. i want to control my destiny. controlling this meet means getting the action moving. getting your financial muscles invested in contracts. i am putting foreign exchange on the side, because i do not control it. manus: you sound like a fairly go-ahead ceo.

wereyear one billion euros spent on acquisitions. i talked about the organic stories, but beating yourself up, are you going to be in the sitting game? have you had the discussion with ihd -- ihd? sebastien: your good to be disappointed. -- you are going to be disappointed, because something is likely to happen in the presentation of the industry. the will to produce fake, but we have no indication. what we're than to be doing is fuel growth. is to bean be doing decided. it is not in litigations. -- move isanger mood not without risk.

i am focused on my three-year journey. whatever comes of it, i would tell you when it happens. toncine: we will hold you to giving us the scoop first. thank you for joining us. let's could you up to speed with more of our top headlines. francine: the evening standard has just reported, they understand that the trio that used be called dear has gone to amazon. they will be working on a new car show. there are so many questions associated with that. moviesn't seem more produced by amazon. manus: this comes down to original content. francine: this was one of the most popular shows ever. manus: three british guys that were icons in terms of what they do, looking at cars. francine: i think everybody

knows top gear. a lot of people watching our show know about. manus: let's crack on with these other headlines. the australian government said it is too early why did every washed up. from madagascar is missing flight inmates the 70. -- white madagascar is missing from flight mh 370. it could be from a boeing 777. 239 people on board. francine: the am -- cooking lagarde says she is pleased that the imf is taking a data dependent approach. >> we have a strong performer with the united states of wellca which is certainly into its recovery process. where we should expect a

variation of monetary policy in the not-too-distant future. andcine: she says the imf fed are not always on the same page. up, we are good to have a dingdong. it is one to watch. we have fed you on the state of the job market. numbers. day where can take a look at those. -- we are going to take a look at those.

francine: welcome back to "the pulse." streaming live on the ipad and bloomberg.com. manus: from the central bank. satisfying progress in the labor market. some improvement. francine: the fed is sticking to his guns. they want the data to do the talking. here's how some of our guests reacted. >> it is a baby step in the direction of saying on the labor market criterion, we are ready to hire. it is not a big move. especially because he did not make any changes to the line which on inflation. -- to the language on inflation. also saying they are still

monitoring. next they left all of their mop -- they left all of their options open. they slightly upgraded the economic outlook. themleaves the basis for to move in september. that is goingnd to be slow, measured cycle. nonetheless, the first move always have some affect on the market. steepct that the curve now. not worried about the position of the fed. as janet yellen is taken to reminding us a lot lately, not really that much hinges on whether the first rate hike is in september or december. a lot hinges on what rates are going to do between now and the end of the 16. >> i think it will be jarring

when we see and it just rate hike, because we have not seen one for some time. take a sniff and recover, because when we have that first hike, the state has already suggested it will be very conservative at the trajectory of future hikes. manus: that is ahead of the u.s. market open. is back in this morning. mike, good to have you with us. when we statistically think the feds will go? you look the stats, you did a lot of interviews. you think now is what you thought going into it. to the statement. you look at the u.s. bond market, and you've got to figure that janet yellen where she

wants them leaning toward the rate increase but not locked in. they want to see more in the data but not in a lot more. growth is reasonable. the gdp is being reported in the u.s. today. they are probably going to go in september. if something goes pear-shaped, they have an out. they can postpone. francine: was it hawkish or dovish statement. michael probably toward the -- mike: it was probably more hawkish. they put in that word some that we are going to be debating for the month of august. what does that exactly mean? they only want to see some further improvement in the labor market. the economy has gotten better. they told us that yesterday. they want the data to confirm that it will continue to do so. manus: mike, there is two more readings of unemployment data.

between now and september. what could really throw this whole agenda? is it the wages? the personal consumption expense? what is your feeling? --o you could start with myco you could start with today's gdp report. with jobs, there is no indication that things are going to go badly. remember, we had a 118 print in march. nobody saw that coming. a consumer confidence report this week where people say jobs are harder to get. mike, thank you. mike mckee there. francine: that's it for "the pulse." stay tuned for the surveillance team. their live next from new york.

from new york.e we are going to do it all again tomorrow morning. ♪ . . .

>> this is "bloomberg surveillance." tom: some daily show. septemberget you to 17. the two-year yield is hotter.

--ll will illuminate eliminate thousands of jobs. facebook is not twitter. mr. zuckerberg can afford to be patient. billions upon billions are reading their newsfeeds hour by hour. good morning, everyone, this is "bloomberg surveillance." we are live from our world headquarters in new york. i am tom keene with vonnie quinn and brendan greeley. i don't even know where to begin? gdp numbers. brendan: which story are you more tired of -- the rate weight or deflategate? by a mile.egate we have gdp in about an hour, we will make you smarter on this important and original to report that you see this morning. another report -- breaking is on time warner cable. vonnie: $1.54. the estimate was for