0. 75 . No real shockers. Will they or wont they raise rates come september . Some of the language seemed to be upgraded. Some games before raising rates. What will that word mean . Youve got breaking news of u. S. Gdp later today, spain, austria, sweden, all giving us their gdp. Spain rising 1 as expected. Lets have a look at how the euro is faring. We saw the dollar rally on the back of that positive language on the job market, saying the improvement is solid. The Federal Reserve said yesterday, euro lower. Look at the dollar, up 0. 4 at the moment. We are currently seeing u. S. Dollar on a tear. Dollar is going to its biggest monthly gain since march. Lets also check in on oil. We are seeing a bit of a bounce up 0. 3 . Supplies cut in the United States. That seems to be pushing up oil. No relenting to the pain for the oil majors. I could have told you about so many earnings. I could have told you about the biggest Engineering Company in europe, siemens. Thats a beat. Ab inbev, thats a miss. Im going to show you some of the Oil Companies. Shell up 2. 8 , slashing jobs. Selling assets. Those japanese assets. Centrica up 1 , too slashing jobs. 4000 jobs to go. They are cutting 1. 5 billion pounds in terms of cost over the next five years in exploration and production. Rub salt repsol off by more than 1 . Net income fell by some 20 . I will give you the banks a little bit later. I will show you how Deutsche Bank is faring in a few minutes. Jon the ftse 100 higher this morning. Shell, secondbiggest gainer on the ftse this morning. The oil producer announced 6500 layoffs and a 7 billion reduction in investment. The company says it is planning for a prolonged downturn. The news comes as the Biggest Oil Companies lean on refining businesses to help offset lower crude prices. The shell ceo spoke to anna edwards just 30 minutes ago. Nobody really knows what the oil price is going to be. It will depend on demand growth for oil, how supply will shrink, geopolitical factors. We believe demand fundamentals will reassert themselves. Jon joining us for more on this story is javier and Goldman Sachs ceo of Asset ManagementAndrew Wilson. Welcome to you both. Have you are, the shell numbers this morning, where do you want to go . I want to start with the language. Three months ago, the story from shell was, oil prices are going to recover. In three years, it was back to business as usual. Today, the Oil Price Downturn could last for several years. The language has changed completely. Hence all the numbers. Job cuts, Capital Expenditures going down. Jon what has changed that has made them suddenly decide you cant assume it is going to be a longer one . Javier first of all, the oil market is going to price this lower for longer. We have seen that opec not only decided in november not to cut production, but over the last few months, opec has increased production. Production of saudi arabia and iraq is over 1. 5 Million Barrels a day higher than it was in november. We are beginning to think that next year we can be 50. Share prices in shell, you guys are getting it wrong. Either you react to this or we will not sell your shares. That is why the share price has been going down. Jon possibly why they are committed to the dividend. Andrew, to bring you into the conversation, just to talk about commodities right now, these guys are reacting to the reality that we could be at 50 for a while. Andrew i would agree with many of javiers comments. This lower for longer notion is being priced in. We also got the iran deal. That is not imminent, but i think if we look into that, it could be as much as 700,000 barrels a day onto the market. The excess supply situation is shrinking, but really slowly. The notion that we might be in the range trade type market for oil 4, 12, 18 months, maybe longer, is what we are seeing priced in. Jon we can talk about the reality of the cuts and what it means for oil. I want to talk about the dividend. Shell just promised me a dividend. Can they keep to that commitment . Javier there is a very interesting number on the statement. They say it is going to be a combined investment by bgn shell next year. They say that is going to be 35 billion. When they announced the deal that was 40 billion. You have 5 billion extra next year that has been liberated. That can be used to fulfill that promise of the dividend. Right now, the dividend looks a lot more safe than it was looking a few weeks ago. All of a sudden, the share price is increasing. What you are looking at is a dividend yield of almost 7 . In a world where Interest Rates for most governments are around 1 to 2 , shell is yielding on an implied dividend 7 . Jon im going to ask andrew that exact question in just a moment. I want to get to the ceo of shell about those job cuts about that cut to investment as well. This is of course the result of a multiplicity of programs that we have going on. Focusing on bottomline improvements. To some degree, it has to do with restructuring and exiting businesses we have. If you add up this year, it comes out to six and a half thousand. But it is not a new program. It is basically adding up what we have in motion. Jon that was the ceo of shell reacting to those job cuts that he announced and the cuts to investment as well. Andrew, when you look at these cuts is the opportunity now for you in equity with the yield that javier is talking about, or is it in credit . Andrew we see good opportunities in the credit markets. We have seen a marked selloff in certain sectors. When we had the initial fall in the oil price, it was pretty indiscriminate. Now, financing is good, they are able to access markets, those companies havent sold off much. In other sectors where people are down, we are seeing yields in the region of 10 to 12 . Some of those companies are going to have difficulty around these kind of levels. But we do think theres opportunities where some companies can get financing and be very profitable. Jon you and i sat here about 12 months ago and talked about the highyield space. We talked about these horror stories. I got a bit excited and you talked me down. You are right. It hasnt ripped through the highyield space in the way a lot of people thought. Maybe what surprised a lot of people is that Venture Capital came into the market and carried on funding these guys. Andrew theres a lot of liquidity around. That liquidity is still finding its way into the market. In the same way, the last few weeks, we havent seen the rest of the oil sector move at all. Highyield in aggregate are up about 7 now. It is really the Energy Sector and the smaller sectors that support the Energy Sector. It is really the market focusing specifically on the Energy Sector. Jon javier, what a week we have had. You have been sitting here, breaking down the numbers. Bp, the only oil major that missed. As i look at shell, i see a multidecade strategy to become a gas company. When i look at the total of this world, theyve got this big refining business. If im an equity investor, do i want the total strategy or the multidecade strategy of the shells of this world . Javier they are very similar. Bp is shifting the gas. Shell is shifting the gas. All the major Oil Companies will have to talk about gas rather than big oil. Everyone in the oil sector is trying to do more gas. I think that is going to be a theme from ceos on the run up to the big Climate Change in paris. Investors like it because it is more sustainable. You are looking at refining. Shell has a very good refining system. I think that tomorrow or friday, they will say they have a very good refining sector. Jon we talked about shell and not once mentioned bg. We can talk about whether it still makes sense. Does it look expensive . Javier it does, yes. I think the language today of the ceo of shell demonstrates that probably it was a bit expensive. Jon javier blas, thank you for joining us. Andrew wilson is with us for the next 20 minutes. Coming up, here on bloomberg tv earnings from across europe. Over 70 companies on the stoxx 600 reporting. We will break down the key ones. Up next, we speak to the diageo ceo. Do not miss that. We will also breakdown earnings from rbs and Deutsche Bank. I said we have not forgotten the fed. The path of least commitment. No rate hike and very little as far as clues. I will be putting that question to andrew. Join us back in two. Jon good morning. This is on the move. It is quarter past the hour. Lets get you up to speed. Facebook beat analyst revenue estimates as it crossed the 4 billion mark for the first time. On a conference call, some analysts asked Ceo Mark Zuckerberg about how the company is making money from instagram and whatsapp. Zuckerberg urged patience and said the focus was still on expanding users. Shares dropped more than 3 in afterhours trading. Siemens reported thirdquarter profit that beat analyst estimates. The dollars gains across the euro helped. Siemens shares are up more than 3 in early trading. Lufthansa says first half trading more than doubled. Fuel cost fell during the six months. Lufthansa also saw its Passenger Airlines improve. Those are some of the earnings so far. Another corporate story this morning, diageo reporting numbers. Forecasting a return to sales growth next year. For more, im pleased to say the ceo of Diageo Ivan Menezes joins us from their offices. A return to sales growth next year. You tell me, what do you think underpins that . Ivan through the course of this year diageo has gotten stronger. As we close out this fiscal year, our business in north america has improved in underlying momentum. Western europe is back into growth. It grew 1 . Africa in the year grew 6 . Asia and latin america got into 6 and 7 growth. India is strong. You put it all together, the company is stronger from a brand standpoint. Our marketing has really sharpened. From a sales standpoint, we are much closer to the consumer. From an efficiency standpoint, we are more productive in everything we do. Our beer business is performing. Our sector has very attractive growth characteristics. We are confident we will deliver stronger performance in the new fiscal year. Jon if things are that good, why has your share price underperformed your peers by so much . Do you think the strategy has not been communicated to investors . Are investors getting this wrong . 7 im ivan im focused on doing the right thing for the company. If you look at the last 12 months, we are much stronger everywhere in the world. Our goal is to outperform our markets, grow faster than the markets, expand margins, bring in strong cash flow. We delivered nearly 2 billion pounds of operating cash flow. It grew 700 Million Pounds the previous year. That is due to operational discipline and excellence in how we are running the business. This is what gave us the confidence to put out our outlook for the medium term. This business will grow topline at mid single digits, expand margins, convert to cash it efficiently, and put that altogether diageo is all about strong and sustained performance. That is the Building Blocks ive been putting in place for the last couple years. Jon lets talk about the u. S. This is your turf. You used to run the business there. The problems you are having, the soft patch that we may be able to call it, are they diageospecific problems or are these sector problems . Ivan the sector, spirits specifically, is fantastically well positioned. People are drinking better. It is creating sustained trends which we see continuing. Diageo has the leadership position in that marketplace. We got a fantastic portfolio of brands including north american whiskey where in recent results, we were up 12 . What you see in our reported results in america in the last order the last quarter is the shift in how we manage innovation. Markets are changing and consumers are changing much faster. I want us to be much closer to how we manage our supply chain. Underlying performance in north america, the person number the consumer side of the business has gotten stronger. For the year we just completed, we grew 4. 2 in value terms for underlying depletion. North america is the engine for diageo. Im confident it will remain a great and highly profitable engine for the company. Jon the sec is looking into your distribution practices in the u. S. Were you surprised by that . Ivan the sec has asked us for some information regarding u. S. Distribution and we are working closely with them. As you would expect, we take this seriously. When you look at our company, im very proud of our values. The way we do business, the control and the transparency we bring to our operations around the world. Jon just to wrap things up, you talk about the strength of the spirits business. Talk to me about the beer business. Some people are talking about spinning this off. It could bring in as much as 11 billion area is it still a central part of your strategy . Ivan beer is core to diageo. It is 20 of our business and it needs to perform. Im pleased in the results weve just announced. Our beer business grew 4 . In africa, it grew 8 . In the u. S. And europe, we were back into growth. Our business is performing better. The Strategic Value of beer for the company is a fantastic position in africa, where we have scale businesses in kenya, nigeria ghana, and many markets. Thats where, in the next decade diageo has tremendous opportunity not just to grow beer, but to grow our business on the platform of beer. Our spirits business grew 13 in the last year. Mainstream spirits grew 36 . Thats where beer plays a very Important Role in diageos future. Jon a very short final question. Do you think this current strategy makes you vulnerable to a takeover . Ivan all i can worry about an focus on is making us the bestperforming company in the sector. We are well on our way. The company is competitively very strong. The 36,000 people at diageo are clear on what we have to do. We have momentum in this business both on the top line and on running a highly efficient business. Im confident we can be one of the industrys top performers. Jon great to have you on the show as always. A big day for earnings. A huge day for european banks. Earnings from Deutsche Bank rbs, bnp paribas. They say they are weighing the biggest revamp ins the crisis. Lets break it down with our bloomberg team. Hans nichols in berlin, Caroline Connan in paris, and richard in london. Hans, break down the Deutsche Bank numbers for me. Hans lets start with the good and the bad. The new Management Team looks like it has a little breathing room because the last quarter that anshu jain was ceo, their profits came in three times expectations. 796 Million Euros area euros. Within that number, theres some nice little nuggets. Mainly fixed income and commodities. On the Equities Trading up almost 40 . Thats the positive side. On the negative side, they did have litigation expenses that were higher. Heres a quote from the ceo john crane. Heres what he had to say about cost. Our challenges are also evidence in the unacceptable high level of our cost. Just in terms of cost cutting, 3. 5 billion was anshu jains goal. What we will be listening for when mr. Crane will be on the telephone, just what are his goals for costcutting . Where does he see shifting things around . The strategy review is in review itself. Jon hans nichols, thank you very much. Let me get you the update on u. K. Banking. Richard parsons joins me now. A profit at rbs. What is that about . Richard the past quarter, weve seen difficult headlines about rbs. They have obviously got a lot of restructuring charges. They are winding down the corporate and institutional bank, bringing it back to a more u. K. Focused organization. They are getting out of the u. S. And asia businesses. That is costing them a lot of money. Theyve taken 1. 1 billion pounds of charges in this quarter alone for the line down of that unit. However, they have been upset by a gain on the value of their citizens u. S. Unit. That Bank Share Price rose by about 12 over the last quarter. It is a technical profit in this quarter. A lot of restructuring charges clouds that. Jon rbs stock up 2. 5 . Some news out of france as well. Bnp paribas reporting earnings tomorrow. In a bloomberg scoop, they are said to be in the Biggest Investment Bank revamp since the crisis. Caroline connan is in paris with the story. Caroline this is a bloomberg exclusive information. According to people with knowledge of the matter, they are reorganizing their securities unit. What they are looking at is to make this business more profitable, more efficient especially the fixed income activities. According to the bloomberg sources, the target for costcutting may be as much as 20 . If you look at 2014 expenses that may represent as much as 1. 2 billion euros. We will be speaking with the cfo of bnp paribas tomorrow morning. You can tune in at 6 00 a. M. London time to hear more on that. Jon that is your banking wrap. We havent forgotten about the Federal Reserve. The path of least commitment. Jon good morning and welcome back to Bloomberg Bloomberg tv. The ftse 100 is back in the green for 2015. Up 1. 5 . Rbs with a big shell and some big job cuts. The two biggest gainers. The dax is higher, in the green by 8 10 of 1 . Switch up the boards very quickly. I will check out the fx market for you. Sterling cable, a pound will buy you almost nothing today. I weaker oh weaker euro is. Down by almost 20 this month. Brent crude, higher by 0. 7 south of 54 a barrel. Lets get the big movers and the stocks this morning. Caroline so many earnings to choose from but i chose the biggest movers because nokia is up there, leading the charge up almost 8 . This is about getting us connected and all of the data traveling between the smartphone devices. Nokia is looking good and terms of profitability. They say they have highermargin software contributed to their sales. The higher margins coming from those more lucrative deals. 11. 5 . Much more than the likes of Morgan Stanley had expected. Phenomenal growth even quadrupling from the previous quarter. More profitable as their business improves. On the downside Reynolds Renault down 5. 5 . Deliveries are eking up 0. 7 growth for deliveries in the first half of the year. A little bit of nervousness about those deliveries sense those shares down. And the booze is not really cruising today. Ab inveb down by 4. 28 . In the knotted states worse than has in the United States , worse than has been expected. 4. 6 growth. The market wants to see at 8 . The market once to see double that at a percent. Jon i want to take it back to the fx market very quickly the checkin on the euro against the swedish krona. This is up weaker euro and a stronger swedish krona. Quarter on quarter, 1 . This is the preliminary reading. This is a big beat. Year on year, 3 the survey 2. 5 . Gdp in sweden is holding up and the wrecks bank is incredibly and the wrecks bank isnt richesbank is incredibly active. Some are debating why the bank is even doing this if the growth is where it is. Now to take it from swedens ricks bank to the Federal Reserve. The u. S. Report from the central bank. The fed is sticking to its guns on the let the theta do the talking. Here are how some of our guests reacted. On the labor market criteria we are ready to hike. I dont think it is a very big move since they did not make any changes both in terms of wanting to be reasonably confident and saying they are still monitoring inflation developments closely. Ask they have slightly upgraded the Economic Outlook but they make no promise they will move in september. We all understand it will be a slow measure cycle, but the first move always has some effect on the market and the fact that the curve evens out marginally. Stocks are up based on the statement is somewhat surprising to me. As janet yellen is taken to reminding us a lot lately, not that much hinges on whether the first rate hike is in september or december. A lot hinges on what rates will do between now and the end of 2016. I think it will be jarring when we see an Interest Rate hike because we have not had one for some time. People will get out the smelling salts and recover. When we have that first hike, as the fed has suggested, it will be very conservative at the trajectory of future hikes. Jon joining us now is and for wilson the is Andrew Wilson the eama ceo at goldmans. I will bring out one of the quotes that everyone is pouring over. The word some. Some further Improvement Needed and then they need to be reasonably confident that inflation will move back to its 2 objective. How much weight do you put on the word some . You dont want to over obsess over a single word. You want to take the tone of the statement. It left the door open to moving in september and they kept the phrase that risks are newly ballots. If risks were skewed are newly balanced. If risks were skewed, you think they wouldve kept that number. If we get strong payroll next week particularly if we see the average earnings number take up that will be the queue to say, we have seen some improvement. Our central case at Goldman SachsAsset Management is that they moving september. Jon does it only matter to bond traders . It is probably true that on the day it will matter a lot. The point is, what are they doing to tighten monetary conditions. What is the reaction to the dollar and what to the Mortgage Rates do . That longterm the next 12 months will really matter in terms of the growth story. Referred laura say we have thats in a rate rise for a long time and there will always be some volatility on their and the speculation over the path. We will be watching the language really closely around that to try to determine if this gradual cycle, how does it impact. Jon when i think about what we need to look at we have a jobs report next week and jackson hole in between them both. Janet Yellen Yellen will not even be there. What needs to happen between now and then that makes you change your mind. It is around the labor market. We talked a long time about the spare capacity. The employment cost index is also out next week and that has been one of their favorite measures. The only place we are place we are seeing potential inflation is the labor market. They are trying to determine what that looks like. There are a lot of other things going on, china, greece and so on. Not even oblique references. It is interesting that the fed feels pretty confident at the moment and in the economy that their job is to assure that Inflation Expectations do not run ahead. Jon what surprise a lot of people is that is five straight meetings to janet yellen has done a great job of keeping the ship and no one doing anything silly. At this point, the central bias of the Federal Reserve is to be risky enough does that change at all next year . What is that mean for me . What does that mean for me . The dissent will start if we see strong labor market numbers. We have average early earnings in 2016 ticking up to 3 . There will be voices on the fed who are keen to get moving. That will be the challenging job. It may be that we get into the rate hiking cycle with enough momentum that janet can keep the crowd together but i think it will be fascinating to see how that plays out through 2016. Jon some sitting here think they might capitulate. Forget greece and europe for a moment some with throw up the word china. The gdp number tells me that everything is ok. Some of the corporate numbers out of europe said things are not great at all. The commodity market tells the that things are terrible if i am looking at iron ore. Over five years it is dreadful. What are you looking at to read what is happening in china. China is a good point. We have been focusing for a long time on greece but china is the big story. There has been a material economic slowdown. Look at Energy Consumption and freight rates. Interestingly, we run our own leading indicators and some of those things are starting to pick up. Look at freight and electricity consumption and construction we all focus on the housing market. Some of those are starting to pick up. It is early days, but it may be that we see some improvement in the second half of china. Jon as a final question. The signs of improvement, enough conviction to have an Investment Plan idea . I think were still cautious enough around china and the impact that it can have these are the first things to look out for. It is a little bit too premature to say here are great opportunities. Were watching it closely. Jon Andrew Wilson, thank you for joining us. Still to come. We talk facebook. The social Networks Earnings beat expectations but shares fall on the back of increased spending. Details after the break. Jon good morning and welcome back to bloomberg tv. This is on the move. Almost 45 minutes past the hour. Lets get to some of bloombergs top stories this morning. Shale shell will cut 6000 jobs this year and adjust capital investment. Bloomberg spoke to shells ceo last hour about where he sees the oil price going. Nobody really knows what the oil price is going to be. It will depend how demand grows and supply shrinks and geopolitical factors. We believe in the long run [indiscernible] the Oil Prices Back into the 70 90 range. Jon secondquarter profit more than tripled. Net income came in line with estimates. The new coceo is pressing ahead with the turnaround plan. Bnp paribas is preparing a Security Unit that may lead to biggest cost cuts since the financial crisis. Theyve enlisted two meant to work on that revamp. That is according to three people with knowledge of the matter. Lets talk safe facebook. They Beat Estimates in the Second Quarter but shares fell in afterhours trade. Speaking on the companys earnings, coo Sheryl Sandberg highlighted facebooks success. People are spending more time on their mobile devices and facebook apps. More than one of every five minutes on smartphones in the u. S. And double usage is driving our growth globally. Jon Caroline Hyde has more details on facebook. Caroline [inaudible] jon caroline, freight we will have to leave it there your microphone is not picking up the sound. Im very sorry. Facebook stock down in extended trading. Impressive revenue north of 4 billion for the first time. Quarterly revenue in the 11 year history. The stock dropping after a big pop in spending. That is the facebook story coming up on this show. The fed as given the verdict on the u. S. It needs further improvement. When we return we will hear from imf manager Christine Lagarde and Goldman Sachs ceo lloyd blankfein. Back after the short break. We clearly have a strong performer with the United States of america which is clearly well into its recovery process. We should affect expect a variation of Monetary Policy in the nottoodistant future. Jon that was Christine Lagarde running the fed in her optimism on the u. S. Economy. Goldman sachs is also quite optimistic. The consumers have deleverage, the blank Banking System has the leveraged. The blessing of low Energy Prices. Housing prices are starting to stabilize and move higher. We are in for a longish positive market. Jon those comments coming ahead of the u. S. Gdp which come out at 1 30 london time. Following a 0. 2 drop in the first quarter. Coming up next is the pulse. Im joined by manus cranny. So many interviews over the next two hours. Manus it will be a great couple hours. I really enjoy that interview with mike yesterday. He is saying, get over yourselves, basically. I love what Mike Bloomberg had to say you dont want to make a big investment decision. But the fed, youre right. She had them all around the table and they all did what you said. Jon what about september . Manus i think it could get rowdy in september. The probability of a hike is 74 for december. That is where we will focus. Two more jobs reports and two more inflations reports and wage reports. I liked the way wilson referred back to his own boss. A very smart man. Always talk about your own boss. Hello, mike. And this is a touch of the italian job. We will talk energy. Frab will have this conversation with that gentleman. And francesco we will have some sound from him. Certainly, the energy theme continues. For me, the show comment about the prolonged. Of Energy Prices hoping for 80 but is running percentages based on 50 and that is the critical point. That is the most critically important part. Bp, here we are with shell, a blockbuster deal. He said the shell ceo said doing the deal works at any price. It gives us cash and momentum. And the sound of a ceo who is absolutely committed. Jon it is a multidecade strategy to become we should call them big gas not take oil. As an investor, i want my dividend so it was so important for them to recommit to that next year. Considering that ne is the first want to cut theres. Everyone is cutting costs and trying to enshrine the dividend. Manus that is the debate whether they will cut costs further because they are protecting the dividend. Or did ne do the right thing by saying we have also got a little bit of the consumer to consider. Louvre tons ofs lufthanses ceo. I wonder if there is a price war. Jon you want a price war. Manus i am already booked on we have the ceo here, sebastian. That is the conversation in terms of challenging the Online Booking phenomena. Go direct. Ask for a discount. Dont pay the full price. Jon manus cranny giving away who he is flying with. He will come up on the pulse a little bit later. Many credits and Francine Lacqua joining us in three minutes manus cranny and Francine Lacqua joining us in three minutes. The ftse 100 up by 0. 25 . I will dig into the footsie ftse for you. The big move this morning, cutting jobs by 6. 5 thousand cutting planned investment i billions of dollars. Investors precommitting to the dividend. It is helping the ftse 100 stay in the green. The dax in frankfurt in germany clinging to gains as well of 0. 1 . The dax up another 17 points this morning. Switch up the board quickly and check on the fx market. Sterling eying me 1. 56. We are down by one third of 1 . A stronger dollar ahead of that big gdp figure later. Gold down another 0. 9 , firmly below 1100 and outs. An ounce. Headed for its biggest monthly drop since 2013. Crude in a bear market. Up 0. 9 but forget about that look at a 12 month chart. The crude rout pushing shell and centrica to thousands of jobs and to slash thousands of jobs. I am on twitter. Best of luck for the rest of your day. Francine the oil giant announces that it is to shed 6000 jobs. Manus Deutsche Bank profit jumps. Secondquarter 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 bloombergs European Headquarters in london