World Markets Simplified

Holland may have abandoned its famously lucrative (and destructive) colonial trade hundreds of years ago, but the country is still a major exporter of one thing: bike culture. The country even has its own Dutch Cycling Embassy, which helps cities all over the world plan safer bike infrastructure. Sales of their famously durable commuting bikes have skyrocketed, and even the their legal system is bike-oriented: Dutch laws on driver responsibility are being used as a model by policy-makers here in the US. Basically, for cyclists, Holland is the Marcia to every other country’s Jan.

Facebook Acquires Karma
Because simply having the largest IPO in U.S. history isn't enough for Facebook, the social network also went shopping. The social gifting mobile app called Karma is announcing that it has been acquired by Facebook. The company's cofounders, including Lee Linden, one of Fast Company's Most Creative People of 2012, says that the app will continue to operate as is. Facebook's interest in Karma is probably due to its expertise in mobile, an area that the social network knows it must master and figure out how to monetize.

• 400 New Hires as Allergan Inc. (AGN) Expands R&D More...

The long awaited multibillion dollar Social Network Facebook Inc offerings set to open in an hour under the ticker FB on Nasdaq. How will it trade on day first and will it cheer stock markets?

Catch the live action here

-Facebook opening bell delayed: Nasdaq

-Facebook shares opened just flat,6 % ( $40.5 ) higher to offering price of $38. Nothing like circuit breaker hit and no excitement. No panic buying seen as share started sleeping. Don't buy now as stock might slip in red soon. Check out our view Why Facebook is a sell? It has slipped from day high of $43.20. There is no more appetite for social media offering and might turn out to be a flop listing

-Facebook Share drift to $38 and might slip soon
-Facebook Share close to $38 at final minutes of trading left

Hewlett-Packard Co. (HPQ) is considering cutting as many as 25,000 jobs, or 8 percent of its workforce, to reduce costs and help the company contend with ebbing demand for computers and services, people briefed on the plans said.

The number to be cut includes 10,000 to 15,000 from Hewlett-Packard’s enterprise services group, which sells a range of information-technology services and has been beset by declining profitability, said these people, who asked not to be identified because the plans aren’t final and may change.

Topless dancers at the renowned Crazy Horse night club in Paris have gone on strike, saying they are not being paid enough to take the shirts off their backs.

The Crazy Horse, one of the most popular establishments of its kind in the world, said it was forced to cancel performances this week for the first time since the cabaret was created in 1951

The night club, which declined to give details on salary demands or current wages, said in a statement that it had always taken the wellbeing of its artists very seriously and that talks were continuing to resolve the dispute.

"It's an exceptional place which has the specialty of presenting a fully naked show," Suzanne, one of the dancers, told RTL radio.

"What's wrong is that we are asked to work 24 days per month for a pay that is worse than miserable," she said.

The cabaret's management said it was doing everything possible to reopen.

"Everything is done to give the Crazy Horse show back to its public," it said.

In the meantime, clients with tickets for a show this week will be offered a new date or a refund, a spokeswoman said.

The Crazy Horse, Lido and Moulin Rouge — where topless dancers perform in carefully orchestrated shows - have been top attractions for generations of tourists and locals.

The sharp fall in the prices of Coal India – from a 52-week high of Rs 422 to around Rs 307 on Thursday – is a signal of major changes in the industry that could end the company’s free run so far.

According to a report in BusinessLine, the coal ministry under Sriprakash Jaiswal has not only proposed the auction of coal blocks in future, but that even Coal India would have to pay a minimum reserve price for the blocks allocated to it. If this policy is implemented, Coal India’s future profitability will be crunched.

Coal India

Coal India’s share value derives primarily from two facts: its monopoly in coal mining (barring the blocks given out to power or steel producers for captive use), and its ownership of the world’s largest coal reserves.

Coal India’s shareholders will live in interesting times. They should avoid fresh investments till the policy map is clear.Reuters

But the this cosy world of monopoly and government mollycoddling is under threat from three directions: minority shareholder activism, the recent Supreme Court directive that all scarce natural resources must be auctioned, and the Comptroller and Auditor General (CAG) report which critiqued the UPA government’s decision to award coal blocks to power companies without calculating the loss to the exchequer from such munificence.

These three pressure-points will push up coal prices even while biting into Coal India’s future.

In the first half of March, a hedge fund, The Children’s Investment Fund, sent a notice to Coal India Ltd’s (CIL’s) board warning that if it continues to follow the government’s dictates on pricing, it would sue. While nothing much has come of this threat so far, it has alerted the government that sooner or later it will be vulnerable to shareholder activism.

In the second half of March, a leaked draft report of CAG talked of a potential revenue loss to the exchequer in view of “undue benefits” of Rs 10.67 lakh crore given to private companies who were allocated coal blocks without an auction between 2004 and 2009.

Two additional factors seem to have spurred a change in the government’s thinking on coal and Coal India. One is the embarrassment caused to the UPA and the Prime Minister in the 2G scam, where the government acquiesced in A Raja’s decision to give spectrum in 2008 at throwaway 2001 prices. The other is the leaked CAG report on coal blocks, where too the PM has been embarrassed by the fact that he was directly in charge of the coal ministry when the blocks were awarded.

It is against this backdrop that Coal Minister Jaiswal has proposed a new “transparent mechanism” for auctioning coal blocks within the next three months. While Coal India’s existing coal blocks may escape the auction burden, the attempt to level the field for all players in coal will crimp its future room for manoeuvre.

But Jaiswal is clearly doing the right thing. It makes no sense to open up coal to the private sector and then retain a public sector near-monopoly with huge advantages.

Here’s a policy framework that may work better than merely auctioning coal blocks at high prices.

First, the government must commit itself to competition as a means to improving coal production efficiencies and keeping costs in check. This means Coal India’s monopoly must be formally ended by either amending the Coal Nationalisation Act of 1973, or by offering its mines for private co-ownership. (Each mine could be spun off into a company and 49 percent stakes given to private operators for captive use).

Second, coal pricing has to be freed – subject only to a review by a neutral coal regulator.

Third, bidding for coal mines should be delinked from power tariffs. Currently, companies bid for supplying power on the basis of tariffs, and the coal block itself comes almost for free. Given that coal can be used for power and many other things, the economic value of coal should be delinked from power policy imperatives. If power tariffs have to be kept low for any reason, they should be kept down through direct state subsidies. Not by gifting away coal blocks – with possibilities of pilferage and misuse.

Fourth, since coal projects are always going to be vulnerable to ecological issues (many coal reserves are in forest areas), clear laws must be formulated on absolutely no-go areas, and places where forests can be partially cut and then reforested after the mining is done.

But whatever happens, one thing is clear: Coal India’s shareholders will live in interesting times. They should avoid fresh investments till the policy map is clear.

Surging food costs offer the most visible sign of India’s inability to contain price pressures, threatening spending in the world’s second-most populous nation. Even as the nation’s benchmark wholesale-price inflation has eased to below 9 percent after breaching that level most of last year, a recently introduced consumer-price gauge shows how little room the central bank has cut to cut interest rates and spur growth.

India’s consumer-price index climbed 9.47 percent from a year earlier in March as the cost of egg, vegetables, fish and meat products rose, after an 8.83 percent advance in February. Wholesale-price inflation in April was 7.23 percent, with food prices jumping 10.5 percent.

“Consumers are facing high inflation driven by food prices,” said Sonal Varma, a Mumbai-based economist at Nomura Holdings Inc. who was rated the top Indian forecaster by Bloomberg for the two years ending August 2011. “Due to the divergence between the consumer-price index and wholesale-price index, the Reserve Bank of India cannot cut rates too aggressively when inflation expectations are so high.”
Swaps Climb

One-year interest-rate swaps, or derivative contracts used to guard against fluctuations in funding costs, have climbed 16 basis points to 8.015 percent since the central bank’s last policy review on April 17, signaling investors pared bets for further reductions in borrowing costs.

Reserve Bank of India Governor Duvvuri Subbarao signaled last month that inflation might limit the room for further cuts after he slashed the benchmark rate by half a percentage point, flagging price risks from the fiscal deficit, energy costs and a weaker rupee.

Wholesale-price inflation unexpectedly accelerated to more than 7 percent in April from a 6.89 percent pace in March. The median of 32 estimates in a Bloomberg News survey was for a 6.67 percent gain. The consumer-price gauge was created in January 2011 and the release for April is due today.
Fastest Inflation

In Europe, Germany and Russia will release producer price data that are forecast to show gains slowed last month, Bloomberg surveys showed. Italy’s industrial orders probably improved in March from a 2.5 percent contraction the previous month, a separate survey showed. The U.S. will release revised figures for factory orders today.

By both consumer and wholesale measures, India’s inflation is the highest in the so-called BRIC group of biggest emerging markets that also includes Brazil, Russia and China. Varma expects the central bank to gradually rely more on the consumer price gauge in deciding policy as the wholesale measure excludes services and mostly reflects manufacturing.

The Reserve Bank lowered the repurchase rate on April 17 for the first time since 2009, to 8 percent, to support an economy that probably expanded the least in three years in the 12 months through March 2012 according to government estimates. The move followed 13 interest-rate increases from March 2010 to October 2011 that sought to tame price pressures in a nation where 75 percent of the people live on less than $2 a day.
’Wrong Time’

“Policy rates are being cut at the wrong time,” said Jay Shankar, an independent economist and political analyst who previously worked for Religare Capital Markets Ltd. in Mumbai. “The RBI’s focus now should be on taming inflation rather than supporting growth.”

Subbarao went against the recommendations of an advisory panel when he cut interest rates by a greater-than-forecast half a percentage point last month, minutes of the committee released this week showed. Four of the six non-central bank members present said the central bank should hold rates, according to minutes of the Technical Advisory Committee on Monetary Policy meeting on April 11. Two members recommended a 0.25 percentage- point cut.

Indian companies’ dollar borrowing costs have surged as policy makers’ inability to cool inflation erodes investor confidence. The rupee fell to a record low this week and global funds have cut holdings of local-currency notes by more than $400 million this quarter after the central bank said Prime Minister Manmohan Singh’s fiscal deficit may stoke price pressures in Asia’s third-biggest economy.
Spending Curb

Vegetable and fruit prices are higher at the retail level than at the farm gate because they are distributed through many stages in between, Shankar said. Prices are buoyant because supplies haven’t increased, he added.

That’s undermining consumer spending, said Paras Bothra, head of research at Ashika Stock Broking Ltd. in Kolkata.

Sales growth for Pantaloon Retail India Ltd. (PF), the country’s largest retailer, is expected to slow to less than 3 percent in the year ending June 30, compared with a 35 percent increase the previous year, according to a Bloomberg compilation of analyst estimates. The company’s shares have fallen 45 percent in the past year, compared with a drop of 11 percent in the benchmark BSE India Sensitive Index.

“If you look at the retail pulse for this quarter, it has been very sluggish all across,’ Bothra said. “Purchasing power has gone down quite substantially because of the fact that inflation remains very high, and earnings growth doesn’t remain that great.”
Mango Juice

For Desai, that means forsaking mangoes, priced at 60 rupees a kilogram at the stall she was visiting, and pomegranates costing 150 rupees a kilogram, about double the price at a wholesale market in New Delhi. Green mangoes are used for making pickles and condiments, in cooking with lentils and to make juices.

“Prices of fruits and vegetables have increased so much in the last four to five years, even milk prices are increasing,” she said. “The government keeps saying that inflation will be brought down, but I see no sign of that happening.”