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CNN International's World Business Today

Aired March 28, 2011 - 04:02   ET


CHARLES HODSON, CNN INTERNATIONAL ANCHOR: Good morning from CNN London. I'm Charles Hodson.

PAULINE CHIOU, CNN INTERNATIONAL ANCHOR: And good afternoon from CNN Hong Kong, I'm Pauline Chiou and this is WORLD BUSINESS TODAY.

The top stories on this Monday, March 28th. As radiation fears spread in Japan, residents are warned to stay away from the damaged nuclear power plant while shares in Tokyo electric power sink sharply.

HODSON: During the credit crunch Middle East investors kept their cash close to home. Now as the region reels from protests, we ask, where will the money go next?

CHIOU: And Japan Airlines emerges from bankruptcy administration. We'll tell you the price it's paid.

HODSON: OK. For now let's take you straight over to the stock market action here in Europe. And we're 62 minutes into the trading day. Here's how it looks right now.

We are seeing modest gains just right across the board. Between about .25 and about two-thirds of 1 percent. We did see some losses emerging. It sends as a little bit surprising. The DAX was hit initially by the fact that Chancellor Angela Merkel has suffered an electoral defeat in the key southwestern state of Baden-Wuerttemberg.

Let's move on to the currency markets because that is actually affecting the euro, as well. And here we are. We're looking at 1.4074, 1.5983, in other words just a shade under 160 for the cable. So a bit of a weakness there in the pod. And the Japanese yen at 80.66. Pauline?

CHIOU: Well, Charles, the markets here in Asia finished mostly lower this session. The Shanghai composite was the only index to post gains boosted by financial stocks. And optimism over several banks earnings reports which are due out this week.

Uranium producers and mining stocks dragged Australia's main benchmark lower by about .2 percent and then NIKKEI in Tokyo dipped again on more concerns about one of Japan's troubled nuclear reactors.

Tokyo Electric Power was the worst performer on the NIKKEI today, plunging nearly 18 percent by the close. And just to put this into context, $29 billion has been wiped off of TEPCO's market value. Well, TEPCO was under fire once again on Monday after overestimating the amount of radiation found in a reactor at the damaged Fukushima Daiichi nuclear power plant. Japan's chief cabinet secretary said the mistake was due to worker fatigue but he also said that was still not acceptable.

Officials are trying to deal with higher than normal radiation levels at reactors two and three, and now temperatures are up in reactor number one. And authorities are warning residents to stay away from the area.


YUKIO EDANO, JAPANESE CHIEF CABINET SECRETARY: It is a very risky area with contamination. Therefore we urge residents not to return to the 20-kilometer radius area.


CHIOU: Authorities have been scrambling to restore the reactor's cooling systems to prevent a meltdown. Now, outside the plant, seawater has tested positive for nearly 2,000 times the normal amount of radiation -- Charles.

HODSON: Well, to say that March has not exactly been a good month for TEPCO would seem like a gross understatement. And now one researcher says he did sound the warning bell about TEPCO well above the earthquake and the tsunami and their devastating consequences.

Paula Hancocks picks up the story from Tokyo.


PAULA HANCOCKS, CNN INTERNATIONAL CORRESPONDENT (voice-over): The destruction a tsunami can reap on a nuclear power plant is clear. What's not clear is whether the owners of Japan's Fukushima plant could have predicted this.

One seismic researcher says yes, telling CNN he warned TEPCO two years ago that there was evidence of an earthquake and destructive tsunami in the same area in the year 869. He asked a safety committee to consider this when deciding how to protect the plant.

TUKINOBU OKAMURA, ACTIVE FAULT AND EARTHQUAKE RESEARCH CENTER (Through Translator): Data on tsunamis can be found in layers of the earth. And my institute has been researching this. Based on this data, it indicates that there was a huge tsunami that occurred previously. That's why I asked the question.

HANCOCKS (on camera): Okamura, who heads up a national research institute, says that TEPCO instead decided to focus on a 1938 earthquake in which one person died. Then he said that they barely mentioned the word tsunami throughout the whole meeting.

TEPCO has not responded as yet to Okamura's allegations. And although they hold press conferences day and night, direct questions are rarely met with direct answers.

(Voice-over): At this press conference, reporters repeatedly asked why there were no preparations for such a big tsunami to hit and called on TEPCO to apologize. The Japanese government has told TEPCO to be open and transparent so as not to lose the public's trust.

But the government itself has not escaped criticism. Fifty-eight percent do not approve of the way they've handled the crisis, according to a poll by Kyoto News Agency.

This man says, "I won't forgive the government for hiding information and the tyranny of the power company." He says I'm protesting because the government is not taking action.

But this man tells me, "I can understand the situation. Because with the earthquake and tsunami combined, there was nothing they could do."

But the public may find it harder to understand mistakes made by TEPCO. Such as miscalculating the number of zeros when reporting the level of radiation in water in the active (INAUDIBLE) turbine room.

A level of 10 million times more radiation than normal revised many hours later to 100,000 times, confusing an already confused public.

Paula Hancocks, CNN, Tokyo.


CHIOU: Well, some businesses in Japan are taking small test steps towards a recovery. Toyota is resuming limited production of its Prius and hybrid Lexus models. However, most of its production in Japan is still shut down with more than a dozen plants closed.

And Wal-Mart is reopening some stores closed by the disaster, which is good news for people struggling to find food, drinks, and other basic supplies. A dozen stores will return to full operation around the hard-hit area of Sendai. Twenty-four were closed in all.

So some big companies are gradually getting back to business in Japan, but here's the question. Should investors jump into the market or is caution the best policy?

Joining me know is Mark Konyn, a CEO of RCM Asia Pacific.

Great to see you once again. So as we can see, there are still some problems with the supply line for a lot of these big companies and there are still a lot of uncertainty. So how should investors approach investments in Japan?

MARK KONYN, CEO, RCM ASIA PACIFIC: Well, it's interesting because prior to the earthquake disaster, investors were beginning slowly to move some money back into Japan. And obviously with the disaster coming, there was expectation the market would sell off very heavily.

It did at the outset, but since then, foreigners have been net buyers. In fact in the week following the earthquake, there was some $11 billion U.S. worth of buying going on in Japan equities and I think selectively it makes sense.

CHIOU: Was that bargain hunting because they realized they were good values?

KONYN: Absolutely. You saw the market really gets sold of uniformly. Obviously some companies getting hit more than others, but all companies being marked down as there was a great level of uncertainty about the recovery and the extent of the damage.

Now there's a little bit more clarity around, perhaps, the extent of the impact on the overall economy. Investors are coming back in and looking for opportunities. Remember, Japan is one of if not the cheapest market in the world, which is one of the reasons why we saw some rotation out emerging markets into developed markets including Japan prior to the earthquake.

CHIOU: And I do want to get to the emerging markets issue in the broader picture, but I also wanted to ask you about Japan and inflation. Because we talked about inflation affecting this region. But do you buy into the argument that Japan's reconstruction plans will put upward pressure on inflation because it'll cause higher demand for commodities like oil and steel?

KONYN: Certainly the rebuilding is going to consume resources. A bigger issue for us, though, is Japan is a net exporter, has a strong, positive capital account balance. As Japan starts to reconstruct, it's going to start to consume rather than export. And that will probably tighten credit conditions globally. Because Japan has been a net exporter of its savings, now it's going to be using its savings with a reconstruction program.

So that's going to put pressure on credit conditions elsewhere and those other economies globally that are dependent on Japan's savings are now going to have to pay more to attract that capital.

CHIOU: But will it also put pressure on inflation? Will it cause higher inflation?

KONYN: I think potentially, structurally with the disruption in the supply chain that could have some knock-on effect in certain key components. But overall, we don't see it really being a big kick-up on inflation per se.

CHIOU: I do want to touch on emerging markets. They had a great year last year. And then in the beginning of this year, just with all of the volatility in the Middle East and also inflationary pressures.

KONYN: Right.

CHIOU: A lot of investors took their money out of emerging markets, put them into developing like Japan. How do you see emerging markets playing out this year? And where are the -- where are the good markets to invest in?

KONYN: It's interesting, because historically, investors bought emerging markets when perceived them to be cheap. And that certainly was the case in the big run-up we have in emerging markets versus developed markets.

From '03 through the financial crisis, the emerging markets were underpriced. Now they're fully priced. And what we've seen through that period is this reallocation, as you say, to develop opportunities, to developed markets.

Now we're at the point where the comparison is at a power. So emerging markets are not particularly cheap. There's some concern about inflation. So what will drive investors to put their money additionally into emerging markets? Now it's a perception of increased growth, of course, but also a change in the structure of the global economy where emerging economies are explaining a larger share of global output.

And I think that's what's going to drive at the margin money back into emerging markets once we get over this initial concern about inflation because the inflation concern threatens growth.

CHIOU: OK. So we have to look for growth opportunities. If you had to choose certain emerging markets, certain countries, are you thinking Indonesia, Thailand, Malaysia?

KONYN: Certainly in this region we've been rebuilding positions actually in China, where we see the inflation threat start to pull back or start to rescind as we get through the middle of the year. And we'll start to see investors come back in and look for opportunities. Because remember, China has been an underperforming previously.

CHIOU: All right. Mark Konyn, CEO of RCM Asia Pacific.

KONYN: Thank you.

CHIOU: Great to see you again. Thanks so much for your insight.

And with one eye on events overseas, Wall Street will also be looking hard at the U.S. job market. Investors will digest a weekly jobless claims on Thursday and the March jobs report from the Labor Department is out on Friday.

U.S. markets looks set for mostly flat open when trading begins later on Monday. And this is where U.S. futures stand in pre-market action at the moment. Pretty flat with the Dow. The NASDAQ composite looks to be opening up by more than .10 percent and the S&P 500 basically flat in terms of the futures -- Charles.

HODSON: Now one business is going strong in spite of -- or perhaps really because of the disaster in Japan.

Sales of doomsday bunkers, fallout tents, and underground shelters are soaring in the United States. This is what one of the more luxurious models look like.

The companies that make these shelters say people are worried about all the turbulence in the world. They're looking for a safe place to ride it out -- Pauline. CHIOU: Well, commodity markets are always nervous about the potential for more disruption to the oil supplies as Libyan's rebels capture some key oil cities during their advance on Tripoli.

We'll look at that and show you how tighter supplies are leading to longer gas lines in the capital.


HODSON: Welcome back. From CNN Hong Kong and CNN London, this is WORLD BUSINESS TODAY.

CHIOU: Revolutions, war, and angry protests across North Africa and the Middle East are continuing to unsettle world markets.

In Libya, rebels are advancing against Moammar Gadhafi's forces, having taken control of some key oil cities. Here's a quick look now. Opposition-held areas are in yellow. Areas under government control in green.

Now anti-Gadhafi forces have retain control of Ajdabiya, Brega and Ras Lanuf. Right now the rebels have Colonel Gadhafi's hometown of Sirte in their sights. Anti-Gafhafi forces they're marching towards the capital of Tripoli and coalition air strikes appear to be paving the way for their westward advance.

These explosions and anti-aircraft fire were heard in Tripoli overnight. As the coalition continues to enforce the U.N.'s no-fly zone. NATO member countries have voted unanimously to bring their operations in Libya under alliance control.

HODSON: Well, the turmoil in Libya and concerns over widespread unrest in the Middle East have been generally driving the price of oil higher, although it does seem to be easing back at the moment.

Well, NYMEX crude currently down 60 cents going for nearly $105 in the electronic trade. Brent crude for May delivery down $1, trading at just under $115 a barrel.

Well, tighter fuel supplies are worrying global markets, but the reality has already hit home there in war-torn Libya.

Our Nic Robertson is in the capital of Tripoli where supplies of petrol are getting shorter and the queues, the lines are getting longer.


NIC ROBERTSON, CNN SENIOR INTERNATIONAL CORRESPONDENT: The line here stretches back for almost half a mile. Almost a whole kilometer. Everyone here waiting for gas, waiting to put fuel in their cars. People here have been waiting hours now.

Well, the gas station just up here, they say they received 30,000 liters, about 8,000 gallons, at 9:00 this morning. It's now coming up to 7:00. They say they've got enough fuel left for about an hour and then they will run out.

UNIDENTIFIED MALE: I've been waiting here for two hours.

ROBERTSON: For two hours?


ROBERTSON: And are you worry about the country running out of petrol, running out of food, other supplies?

UNIDENTIFIED MALE: Yes, of course, because many people like to -- how could we live without eating and gas? Without -- how can we use our car without gas?

ROBERTSON: A lot of people here won't be getting their fuel.

The government says the problem is the international embargo against Libya is biting. But a few weeks ago they were getting four to seven ships coming into the harbor here. Now they say they were getting none. And that includes fuel for cars.

Government also says that the country can potentially run out of food supplies, run out of medical supplies, and that is beginning to worry people in this city here.

This taxi, just another person trying to get into line here to fill up with fuel. But from across the country, we're hearing another picture emerging, as well. Not just running out of fuel, but people running away as the rebels advance from the east of the country.

Gadhafi's home city and stronghold of Sirte, journalists on a convoy near there report seeing people fleeing that city as rebels advance across the country to the other side. But here in the capital, Tripoli, the situation, the sanctions beginning to bite.

And this is an image that the government wants the world to see that they're beginning to suffer here. The situation too, the rebels are making gains. Many of the people here wouldn't have seen that on state television because the government's not telling them.

Nic Robertson, CNN, Tripoli, Libya.


CHIOU: Japan's national airline has had a rough time in the past couple of years, but better days may be just around the corner. We'll have much more on that story next on WORLD BUSINESS TODAY.


HODSON: It's interesting because profit taking has sent the price of gold tumbling from its all-time high last week. Right now it's down more -- just over $11.30 trading in just over $14 -- $1418 a (INAUDIBLE).

Well, welcome back. You're watching WORLD BUSINESS TODAY live on CNN. CHIOU: Japan Airlines has just announced that it's emerging from bankruptcy protection, and that's after spending the last 15 months trying to restructure its business model amid a huge sea of red ink.

Our Asia business analyst Ramy Inocencio has the details on Japan's flagship carrier.

And Ramy, this is a pretty big development.

RAMY INOCENCIO, ASIA BUSINESS ANALYST: Hey, Pauline, you know that's exactly right. It is a major turnaround for an airline which at one point was the world's largest international carrier. In just the past hour actually Japan Airlines held a press conference saying it is emerging from bankruptcy administration. The carrier will be smaller and more focused on the Asia-Pacific region. And here are the details.

The new JAL will ground more than 100 planes, including the last of what used to be the world's largest Boeing 747 fleet. It will also cut nearly 50 routes from its global network, but will boost its partnership with the One World Alliance, that includes Cathay Pacific, British Airways, and American Airlines.

And that's on top of massive layoffs from last year through December of 2010. JAL had already laid off nearly 15,000 workers and offered early retirement to others. And all of these belt-tightening measures are paying off.

From last March to December, JAL was finally able to report a profit of about $1.9 billion. That's after three of the last four years before that in the red. So looking ahead, we're now expecting to see a leaner, more efficient, and more profitable Japan Airlines than the one we knew before 2010.

CHIOU: So that's a good thing.

Now when JAL had to go under bankruptcy protection last year, they had to de-list from the Tokyo Stock Exchange. So what are its chances of re-listing again?

INOCENCIO: You know that's a good question, actually. For -- looking into the future there are plans for that to happen in January 2013. And that means JAL could be off the exchange for a total about three years. It de-listed in February of 2010. Now that re-listing for Japan Airlines is according to ETIC, basically that's a government- backed fund that's been helping JAL out of bankruptcy.

Now they put about $11 billion into the company and they hope to sell their stake in 2013. One thing to note, though, ETIC's forecast came out before the quake and tsunami hit. Now those disasters are impacting Japan's airline industry for sure. Foreign and domestic passenger numbers are down. So it's actually not the best time for JAL to try to reemerge.

What will likely happen is that January 2013 relist date will be pushed back, but it should still stay on our radar for the future. CHIOU: And it will now be smaller and more focused like you said.

All right, Ramy, thanks so much. Ramy Inocencio, our Asia business analyst -- Charles.

HODSON: Well, Pauline, it used to be a prime place to invest, now spreading unrest has many investors thinking about moving their money out of the Middle East. We'll tell you where they're taking it. That'll be next.


HODSON: From are CNN London, I'm Charles Hodson.

CHIOU: And I'm Pauline Chiou at CNN Hong Kong. Welcome back to WORLD BUSINESS TODAY.

HODSON: Let's take another look at how European stock markets are moving now. But what's very much overshadowing all of this is the severe electoral setback that the German chancellor Angela Merkel has suffered in two southwestern states both in the Rhineland-Palatinate but also crucially in Baden-Wuerttemberg. Very rich southwestern state where the CDU -- in other words Miss Merkel's party -- has been in power for nearly 60 years.

And it looks as they and their liberal allies are going to have to think again. It'll be a Green and Social Democratic coalition probably coming in there. Still having to wait and see what the political arm-wrestling will lead us to.

But in terms of the DAX, that didn't make for losses. They are being recovered now. And we're looking overall at the markets up by about a quarter to two-thirds of 1 percent in the case of the ZURICH SMI.

Pauline, what about over there in Asia?

CHIOU: It's a little bit of a different story here in Asia, Charles, where the markets finished mostly lower this session with the exception of Shanghai. Financial stocks led the gains there.

And in Australia, uranium producers and mining stocks dragged down the main Aussie benchmark. It dragged it down lower by about .2 percent.

Meanwhile, the NIKKEI in Tokyo dipped again on more concerns about Japan's troubled nuclear reactors. And Tokyo Electric Power was the worst performer on the NIKKEI. Of course, that's the company that operates the nuclear power plant there that's damaged. It plunged nearly 18 percent by the close and the NIKKEI was down by .6 percent at the close of the session.

Well, shares of Asia's biggest oil refiner Sinopec fell this session after the company's full-year earnings missed expectations. Sinopec had lost nearly 5 percent by the close on Hong Kong Stock Exchange, the HANG SENG.

The Chinese oil giant said its profits rose 14 percent in 2010 from the previous year to nearly $11 billion, but those earnings still fell short of estimates as government-controlled fuel price increases fail to keep pace with the rapidly rising cost of oil.

Sinopec's refining business saw the biggest slump with profits there down more than 40 percent.

And staying with China, Unilever is looking to that market for more growth. It's set to become the first European multi-national to launch offshore bonds denominated in the Chinese currency. That's according to a report in the "Financial Times."

Now these kinds of bonds are nicknamed "dim sum bonds." And the "FT" is reporting is the dual listed Anglo-Dutch company plans to raise $46 million from institutional investors in Hong Kong.

Unilever hopes the move demonstrates its commitment to China. The multi-national is also expecting to be among the first foreign firms to list Renminbi-denominated A-shares in Shanghai once the regulatory framework is in place.

In the U.S., jobs will be front and center for investors on Wall Street this week. And here's what they can expect to be mulling over in the next five days.

ALISON KOSIK, CNN BUSINESS CORRESPONDENT: This week brings readings on the economy from the housing sector to the auto industry, but the focus will be on the government's monthly jobs report coming out Friday.

I'm Alison Kosik at the New York Stock Exchange.

The unemployment is expected to hold steady at 8.9 percent after dropping significantly in February. February's reading was the first time the jobless rate fell below 9 percent in almost two years.

On Wednesday, we'll get a preview of what to expect with reports on private sector payroll numbers as well as corporate layoffs.

Also on the calendar, a report on personal income and spending. Both are expected to increase slightly.

One of this week's housing reports measures pending home sales. That's when the contract is signed but the deal is not yet completed. There's also the Case-Schiller home price index, a closely watched figure, as the housing market continues to drag on our recovery.

And we'll get earnings from home builders Lanar and KB Home. Auto makers will report car and truck sales and some analysts say Ford may outsell General Motors in March for only the second time since 1998.

And on Friday, Apple turns 35. Originally known for its Macintosh computer, Apple is now the consumer electronics power house behind the iPod, iPhone, and iPad. Apple introduced its first computer, the Apple I, in 1976 when co-founder Steve Jobs was just 21 years old.

That's a look ahead at the week in U.S. business news. At the New York Stock Exchange, I'm Alison Kosik.

HODSON: Now Egypt's stock market may be on the mend. Its benchmark index gained more than 5 percent in Sunday's session. That comes just days after the country reopened that exchange.

It was shut for nearly two months following the mass protests that of course eventually falls prison Hosni Mubarak from power. Well, any gains are positive. The index has a long way to go. Egypt's EGX 30 is down more than 27 percent for the year.

Well, other stock markets in the region also posted gains on Sunday, but they've changed their tune today. Here we are, Saudi Arabia off about .1 percent, Dubai off more than .5 percent as is indeed the ADX General Index in Abu Dhabi.

Well, the unrest spreading across much of the region has caused a lot of uncertainty lately on the stock and oil markets. It also has some Arab investors thinking about moving their money to more stable economies.

Leone Lakhani joins us now from CNN Abu Dhabi with more on that.

So are they selling off right across the board? Or is this really sector by sector that they're looking at it?

LEONE LAKHANI, CNN CORRESPONDENT: Charles, we are expecting and investors are quite bullish still on the oil-related stocks and on oil-related companies. And that's because we expect commodity prices to remain relatively high due to the unrest in the region.

But when you speak to foreign investors and speak to foreign funds, they're still uncertain and wary about the political situation in the region. So they're likely to hang on to their cash.

So, Charles, as you mentioned, the main question is, where will all this money that was earmarked for the Middle East that was invested in the Middle East, where will that money go next?


LAKHANI (voice-over): Scenes of battles and devastation in Libya as thousands flee across borders to neighboring countries. It's just the latest in the unrest that's sweeping across the region and creating a climate that can frighten investors.

UNIDENTIFIED MALE: Risk is different from one country to another. Quite country specific. You can just range it from, let's say, you know, economic concerns, closing up with the economy, nationalization in Egypt to civil war in Libya. But overall, the mother of all risks scenario is oil disruptions.

LAKHANI: And that forced Middle East to rethink their option.

(On camera): The global financial crisis brought Western economies to a virtual standstill. And that forced Middle East investors along with their rich cash reserves to re-think where to put their money. With growth in the Middle East and North Africa, outperforming the West at an average of 3 to 4 percent, many of the region's investors opted to keep their cash close to home.

(Voice-over): Foreign direct investment around the world suffered as a result of the financial crisis. But the Middle East and North Africa saw its share of the global total go up from 6.5 percent to more than 7.5 percent in 2009.

Much of that investment came from the region itself with many funds earmarked for projects in North Africa. From real estate developments and manufacturing bases in Egypt, energy products in the newly opened market of Libya, and tourist resorts in the likes of Tunisia.

Now as the region reels from unrest those invested in these types of projects have to reevaluate whether to cut their losses. While the oil-producing Gulf states could see more revenues from higher crude prices.

UNIDENTIFIED MALE: Clearly anything outside the oil and gas sector, which is export-focused, is going to do very badly. The uncertainty has put a stop to a lot of domestic activity whether there's retail, wholesale, or manufacturing services.

LAKHANI: The uncertainly has also gotten investors cashing out of the region's main stock markets. The Arab Monetary Fund says the region's main indices lost $140 billion in market capitalization in the five weeks after protests began in Egypt. That's equivalent to more than 9 percent of the region's GDP.

UNIDENTIFIED MALE: If you talk to most Middle East investors right now who are looking to relocate their money, they're looking for safety and stability more than anything else. So the first port to call is likely to be the U.S. because the link with the dollar, because of the historical ties that investors have to that market, then to Europe.

LAKHANI: And added concern for businesses, the reversal of liberalization and privatization policies. The trend that's been driving growth in the region in recent years. Governments are now likely to step in to keep companies afloat and meet the welfare needs of the people.


LAKHANI: Now, Charles, because of the situation at the moment, capital is likely to be tighter. And that may have implications for the private sector. And the private sector has been seen as the engine of job creation over the past few years. Governments across the Middle East have taken many policies to promote this sector.

Now we know as that's the biggest challenge in the region. We are seeing a population 60 percent under the age of 25. A huge portion of the population entering the workforce and the World Bank has said that a total of $100 million jobs need to be created by 2020 to absorb this young population in the Middle East. So if there's pressure on the private sector, where will those jobs come next? So what's what we'll be having to keep an eye on, Charles, whether the governments -- these new governments that we're seeing will keep the policies going to support the private sector. And if not, where will those jobs come from -- Charles?

HODSON: OK. Leone Lakhani joining us there live from Abu Dhabi. Many thanks to you -- Pauline.

CHIOU: Well, Charles, so we're going to be talking about jobs and unions coming up next on WORLD BUSINESS TODAY. A tough union fight in one U.S. town. See how these firefighters rose from the ashes.


HODSON: Hundreds of thousands of protesters marched in London on Saturday. They were protesting against proposed austerity measures and cuts in public spending -- public sector spending.

The Trade Union Congress organized the march. That's the umbrella organization for labor unions here in the UK. Before the demonstrations was over, (INAUDIBLE) violence broke out. Police arrested more than 200 people. In all, 84 people were injured, including 53 protesters and 31 police officers.

Well, welcome back to WORLD BUSINESS TODAY.

The German state of Baden-Wuerttemberg has a conservative, historically pro-business voting record. But now for the first time since 1953, the conservative Christian Democratic Party and its allies have lost their majority there.

The Green Party, which gained votes amid concerns of nuclear power, plans to form a coalition with the Social Democrats and govern the state -- Pauline.

CHIOU: In the United States, Charles, it's a different kind of political battle raging. Labor unions are finding themselves on the defensive as officials try to blunt their costs and their influence.

Maggie Lake reports on a truce of sorts in one town in New Jersey.


MAGGIE LAKE, CNN CORRESPONDENT (voice-over): They filed into the Orange, New Jersey, City Council Chambers to wild applause. Twelve firefighters laid off in January in uniform once again.

UNIDENTIFIED MALE: Raise your right hand.

LAKE: And taking their oaths of office. Among those back in action, Cleophas Bell. When we first met him back in January, he was worried about his family and how to care for his family after losing his job in a wave of budget cuts.

CLEOPHAS BELL, FIREFIGHTER: Never in a million years did I think I would be laid off because that is one of the lures of the job is job security.

LAKE: Three months later he and 11 other firefighters were all smiles and ready to celebrate.

ELDRIDGE HAWKINS, MAYOR OF ORANGE, NEW JERSEY: This is a very, very proud day in the history of Orange. And it certainly sets a precedent in our city for what can be done in difficult economic times. And it also sets an example for what can be done throughout the state and throughout the country.

LAKE: In a year when budget-cutting battles between state and local governments and their unions have flared up in Wisconsin, Washington state, and other parts of the U.S. and where 24 states have laid off workers to help balance their books, this agreement is a rare piece of good news and shared sacrifice.

The breakthrough in Orange came after firefighters agreed to new cost- cutting concessions that not only helped rehire Cleophas and his colleagues but paved the way for the hiring of 12 new firefighters under a federal grant. The promise of a larger force helped sealed the negotiations.

HAWKINS: If you put in the work, you can get these dollars. And if unions are willing to bend, then you can get concessions and bring people back to work. But more often than not, we're seeing municipalities come to an impasse.

UNIDENTIFIED MALE: It's about time. Welcome back.

UNIDENTIFIED MALE: The uniform fits you -- hey, how much weight you gain, man?

LAKE: Orange budget woes and its negotiations with other unions are far from over, but for this afternoon, at least, the labor battles affecting Orange and the rest of the nation seemed far away.

BELL: I'm back in business.

LAKE: Maggie Lake, CNN, Orange, New Jersey.


HODSON: When we come back to WORLD BUSINESS TODAY, an alarming trend on global food markets. We'll find out what can be done to reign in surging food prices.


HODSON: Welcome back. Live from CNN Hong Kong and CNN London, this is WORLD BUSINESS TODAY.

CHIOU: Food prices around the globe are hitting record highs. The U.N.'s Food and Agricultural Organization says the food price index -- a measure of basic food prices around the world -- jumped more than 2 percent between January and February. It's now at its highest level since this index started in 1990. Among the reasons is political strife in Ivory Coast. Exports of the country's cocoa beans are down 94 percent as the president refuses to hand over power.

Another factor is a Russian ban on wheat exports that will stay in place until at least September of this year. According to Russia's agricultural minister, the export ban is meant to make sure that Russia has enough grain to meet its own domestic needs.

So how does the global food market meet the growing demand? We put that question to the head of the U.N.'s Food and Agricultural Organization.


JACQUES DIOUF, DIRECTOR-GENERAL, U.N. FOOD AND AGRICULTURE ORGANIZATION: We are not investing enough in agriculture. World population is increasing and will go from the present 6.9 billion to 9.1 billion. To feed this population, we need to increase world food production by 70 percent, and in developing countries by 100 percent. Yet we have seen the share of agriculture in official development assistance go from 19 percent in 1980 down to 3 percent in 2006. And now we are at an average of 5 percent.

If we look at the budgets of developing countries or average, they are looking at 5 percent to agriculture instead of a minimum of 10 percent. And then in the area also of private investment, we have a deficit of $50 billion a year.


CHIOU: And one other factor driving up the cost of food, oil as the price of fuel goes up, so too do food prices -- Charles?

HODSON: Now weather conditions are looking pretty good for all of you business travelers out there. But temperatures are heating up on both sides of the equator.

For more on that, our meteorologist Jennifer Delgado joins us from the International Weather Center.

Good morning, Jen.


HODSON: Heating up on both sides of the equator. How come?

DELGADO: Yes, we're dealing with warm temperatures down below as well as north of the equator.

Now let's get to the good news. We've been talking about Europe being so spoiled by the mild temperatures. Well, we have an area of low pressure. Real weak one. That's going to be moving over towards the east. It's still going to be quiet, but a cold front is going to be moving in, of course, and that is going to bring with along with chance for a few showers and it's also going to drop those temperatures back down.

But for today, still looking pretty nice. We're expecting a high of 16 degrees in Paris, 17 in Madrid, 12 in Vienna, 15 degrees in Rome, and really you can see a good portion of Europe above freezing.

And guess what, your hot spot today, Brussels. Today high of 13 degrees but it gets even better on Tuesday, expecting a high of 17 degrees. That's running about 5 degrees above average for this time of the year. So weather certainly looking pretty good across Europe.

Down towards south of the equator, we're talking about in western Australia. For Perth, temperatures have been rather warm over the last several days. We're seeing the temperature right now of 31 degrees, today we peaked at 34. And for tomorrow, it's still going to be quite hot because we're dealing with these dry winds coming in from the west.

And unfortunately, we don't have any rain in the forecast. In fact, they haven't had rain in 54 days. Not since February 1st. Temperatures, as I said, are going to remain in the 30s as we go through the rest of the week.

On a wider view across Asia, fairly quiet, temperatures warming up, as well. We're looking at a temperature right now 15 degrees in Beijing, and then tomorrow we're talking about the 20s. So soaring temperatures all across parts of the world.

Right now let's take a look at your city and the rest of the forecast to see what your weather is going will be like today.

And Charles, I have a few ways for people to save some money. We have some video coming to you from March 26th.

Charles, check this out. This is out of Las Vegas. No, it wasn't a power outage. Actually this one's out of Sidney. And that is showing you Sidney taking part in Earth Hour. Of course, this is a way for people to become aware of the earth's natural environment and save a little money.

They turned off their electricity at 8:30 p.m. on March 26th. And this video coming out of Las Vegas on the strip. And as we watch real closely, we'll see the lights go out very quickly.

So, Charles, that's how we save a little money and we have a little nice time. You can have a romantic dinner by candlelight with your family, something like that, to pass the time.

HODSON: Yes, that sounds good actually. We were without power for about a day and a half a little while back and it was very romantic, but quite chilly actually after a while.

DELGADO: Kind of rough.

HODSON: Some heaters didn't work. Anyway --

DELGADO: You'll miss that heat. HODSON: Depends how long until they turn the lights back on.

Jennifer Delgado, thank you very much, indeed.

Let's have a quick look at the stock markets here in Europe. We are looking at some gains after what was forecast to be a more hesitant start up by around about .3 percent pretty much across the board.

Now one exception to this picture, shares of Porsche have slid in Frankfurt after the company approved a $7 billion capital increase. Porsche's supervisor -- there we are. The numbers off by 3 percent there.

Porsche's supervisory and executive board approved a plan to sell more shares to current shareholders at 38 euros apiece on Wednesday. The capital boost for the debt ridden German carmaker will help clear the way for its planned merger with Volkswagen -- Pauline.

CHIOU: Well, Charles, your markets are looking much better than how we ended up here in the Asia-Pacific region. Most of the indexes ended lower. The NIKKEI down by .6 of a percent. Tokyo Electric Power was the big downer there. It closed down more than 18 percent.

Of course, TEPCO is the company that operates that damaged nuclear power plant.

The Shanghai composite was up by about .2 percent. It was the financial stocks that really led the gains there. And the main Aussie benchmark down by about .2 percent. Uranium and mining stocks dragging the index. And the Hang Seng down almost .4 percent by the end of the session.

And remember, if you want to comment on any of the stories in the show, you can get in touch with the whole WORLD BUSINESS TODAY team on our Facebook page. Just go to

And that is it for this edition of WORLD BUSINESS TODAY. Thanks for joining us. I'm Pauline Chiou in Hong Kong.

HODSON: And I'm Charles Hodson in London. We'll be back at 2:00 p.m. London time, that's 9:00 p.m. in China, 10:00 p.m. in Tokyo. "WORLD ONE" is next.