Market Notes
By CUSTOS
THE less confident view of the downward trend of interest rates, to which I have already referred, is still worrying the gilt-edged mar- ket. A Barclays Bank Review warning that 'interest rates are likely to remain high' had a depressing effect on the market and brought in some profit-taking. Incidentally, this warning is a bull point for bank shares, for bank profits would fall on a cut in Bank rate. The re- assurance given by the Government to the TUC that it would take action if the rise in unem- ployment became steeper than it anticipated brought no relief to equity shares. The Financial Times index fell to a new low of 284, the lowest since 1963. It is obvious that the Government is beginning to have nerves about the employment situation. The Bank of England sent a letter to the banks last week reminding them that while the ceiling on advances remained in force (105 per cent of April 1965) unused resources could be tapped for three priority uses—exports, productive investment in industry and agricul- ture and bridging finance for house purchase. Advances have, in fact, declined again last
month and now stand at 1011 per cent of April 1965. It is beginning to dawn on the Govern- ment that advances decline not because of the banking squeeze, but because of the trade reces- sion and the growing lack of confidence in the business community.
Disappointing company reports—the latest from REED PAPER—remain a depressing feature in the equity markets. The denial of the pro- posed merger in the fibre-textile industry brought ICI, COURTAULDS and matt. down to new low levels for the year. HOUSE OF FRASER fell on the death of Lord Fraser and, at 14s. 444., these shares now return 91 per cent on the 27f per cent dividend, which no one expects to be maintained. Beer shares remain friendless, the reason being that Mr Stewart will not allow any increase in prices, but beer consumption last year was another record with a rise of nine million gallons to 1,089 million gallons—twenty gallons per head of the popula- tion! The odd thing is that a continuance of the business depression will probably increase the consumption of beer—certainly on the part of those who like to drown their sorrows.
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