Wall Street rallies on Obama stimulus plans, Newspaper group bankrupt, Local shares fall: Economy roundup

Wall Street has enjoyed a 4% rise after reports president-elect Barack Obama plans to inject billions into new infrastructure spending to help spark economic growth and new jobs.

Wall Street has enjoyed a 4% rise after reports president-elect Barack Obama plans to inject billions into new infrastructure spending to help spark economic growth and new jobs.

Companies associated with construction projects helped lead the rally, sending the market upwards for the second day in a row.

The Dow Jones Industrial Average closed up 4.16% to 8994.39. Oil also rallied 7% to $US43 a barrel.

Newspaper group collapses

But the good news hasn’t lasted. US publisher Tribune – which owns the Los Angeles Times, Chicago Tribune and the Baltimore Sun – has filed for bankruptcy. It is the first major newspaper publisher to do so following the global financial meltdown.

The group has been left with debts of $US13 billion after a takeover by real estate mogul Sam Zell.

But while the company says filing for bankruptcy will help get its finances in order, analysts argue the group will most likely have face the difficult task of selling some of its major titles.

Dow Chemical has confirmed it will close 20 facilities and cut 5000 jobs in the biggest cutbacks by a chemical company during the downturn.

But the company also says it will slash 6000 employed contractors as part of the cutbacks, and that it should now generate cost savings of $US700 million by 2010.

Auto industry bailout closer

Meanwhile, the $US15 billion auto industry bailout is set to be finalised by the White House and congressional Democrats. The bailout, designed to prevent General Motors and Chrysler from collapsing, will be voted on in the Senate and House of Representatives next week.

“I think there should be agreement by the end of today,” Democratic Congressman Barney Frank told CNBC television.

A senior Republican aide is also reported by Business Spectator as saying both sides are anxious for details about the plan.

“But I assume it will get through relatively easily… I have a hard time believing we get out of here without doing something,” the aide says.

Local shares fall

Back home, the Australian sharemarket has suffered a fall despite the Wall Street rally. The benchmark S&P/ASX200 index was down 33 points or 0.91% to 3598.6 at noon AEDT. The dollar has also risen to $US66 cents.

BHP shares have enjoyed a 4.3% rise to $28.39, while Commonwealth Bank shares dropped 5.7% to $30.94. NAB shares also fell 3% to $20.33.

Westpac will raise its tier-one capital ratio to 8.32% after an underwritten share placement to shareholders worth $2.5 billion. The bank says it has undertaken the capital raising to pursue growth opportunities, and that it is also due to the impact of the downturn.

Westpac has requested a trading halt until 10 December, with its shares last trading at $17.88.

“The capital raising further increases Westpac’s capital resources, enhances its balance sheet flexibility and will position the organisation to capture organic growth opportunities,” it said in a statement to the ASX.

Meanwhile, Fairfax Media says talks are still underway regarding the sale of television production group Southern Star, but no deal has been made.

There have been reports that Dutch television producer Endemol has offered around $160 million for the program production and distribution division, but Fairfax says nothing has been finalised.

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