Shares fall on European banking woes, Fairfax flogs TV business: Economy roundup

The Australian sharemarket has opened sharply lower today after a worrying night on European markets, where the Royal Bank of Scotland shocked the global financial community by reporting a $61 billion loss.

The Australian sharemarket has opened sharply lower today after a worrying night on European markets, where the Royal Bank of Scotland shocked the global financial community by reporting a $61 billion loss.

After opening 2.1% lower, the benchmark S&P/ASX200 index has continued to slide and was down 127.1 points or 3.53% to 3462.2 at 12.00 AEDST.

The Aussie dollar also lost ground, falling below US67 cents.

With Wall Street closed overnight for the Martin Luther King holiday, all eyes were on Europe – and the news was bad.

Just a day after the British Government announced it was launching a second bank bailout package, which is designed to boost lending for businesses and home owners, the Royal Bank of Scotland has revealed it is set to report a loss of up to $61 billion for 2008, the largest loss in British corporate history. The news sent shares plummeting 67% to 11.6 pence.

The news sent the FSTEurofirst 300 index down 1.6% points to the lowest mark since November.

Not surprisingly, this news has weighed heavily on our local banks. NAB shares have fallen 3.9% to $18.68, while Commonwealth Bank shares have lost 3.9% to $26.37. ANZ has fallen 4.4% to $13.80, and Westpac has also lost 4.6% to $15.35.

In other big corporate news, Fairfax has sold television production business Southern Star to Dutch media group Endermol for around $75 million.

“The sale is conditional on obtaining regulatory approvals and certain other matters, and is expected to be completed in the first quarter of 2009,” Fairfax said in a statement to the ASX.

“Combined with the recent sale of Carnival Film and Television to NBC Universal, Fairfax Media will receive total net cash proceeds of approximately $120 million.”

Fairfax chairman Ron Walker said the sale proceeds would be put towards reducing debt.

Meanwhile, Russia and Ukraine have signed a 10-year gas supply deal after Europe has been cut off from supplies during a dispute between the two nations. Ukraine will purchase Russian gas at a 20% discount during the year compared to market prices according to the deal.

But the agreement has sent oil prices down $US2 to nearly $US34 a barrel.

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