12 MAY 1923, Page 27


[By OUR CITY EDITOR.] MARKETS REFLECTING. [To the Editor of the SPECTATOR.] SIR,—There has been a pause in the prolonged and almost uninterrupted rise in Stock Exchange securities over a period of nearly eighteen months. In some quarters markets during the past -week have, indeed, been dull and even depressed, but, as a matter of fact, it is, I think, the resisting power of the Stock markets to adverse conditions which calls quite as much for notice as the trifling reaction. A week ago I drew attention to the enormous extent- of the rise in Stock Exchange values, 'especially in the Investment group, and expressed the view that while "the steadiness of Investment markets may probably be main- tained, the attractions to the mere buyer for enhancement in capital values are rapidly diminishing." I observe that this same view was emphasized by Mr. J. M. Keynes in an article in one of your contemporaries, in which, indeed, Mr. Keynes advances the argument to the point that "at present prices . . . . Conversion Loan, Funding Loan and the like are a highly speculative pro- position." This is a view I am not altogether prepared to adopt, preferring to adhere simply to the opinion that the attractions " from the standpoint of expectatiOns of enhancement in capital values are diminishing.

It is not merely a realization of the magnitude of the rise in securities which has been responsible for the hesi- tating tendency of markets during the last few days. The gravity of the Ruhr crisis has been too pronounced to escape the attention of the Stock Exchange, and even if markets here had been indifferent the dullness of the Paris Bourse would in itself have arrested attention. It is true that for many months the Stock markets have not only gone on the even tenor of their way almost unmindful of the serious state of affairs in &trope, but, as I have often explained, those very conditions have at times actually ministered to the rise in Investment stocks, owing to the general want of confidence engendered and to the flight of foreign capital to this country for investment.

It is, however, impossible to ignore the grave issues, both political and economic, which are involved in this problem of Reparations, now accentuated by the Ruhr crisis. And whether the matter is viewed from the stand- point of our relations with France, or from the standpoint of the ultimate outcome of the• situation upon the financial and economic position of France and Germany, or from the standpoint of Europe as a whole where international trade is hampered by, the Ruhr deadlock, the outlook is a disquieting one. Fresh evidence of the disastrous state of affairs in Germany has been furnished during the week by a further slump in the mark and a further great expan- sion in the note circulation, so that it is now about five times as large as- it was at the beginning of the present year. Meanwhile, the Reichsbank is apparently drawing on its gold to obtain credits abroad, and so far from the situation- having been. relieved either by the German offer or the French reply, it seems rather to have been worsened, or, at all events, complicated. So closely are economic and political considerations inter- twined in this Reparations Problern that the City has throughout been embarrassed in forcibly expressing its views. It may be well, however, at this juncture to record in the plainest language that sympathy for (Continued on pagi 812.) France and a remembrance of German methods alone prevents a clearer expression of opinion in banking and business circles that the action of France in the Ruhr is detrimental to her own interests and to those of Europe. Notwithstanding, however, the growing appreciation of the extent to which securities have risen, and also the keener realization of the grave issues involved in the Ruhr crisis, the reaction in markets during the past week so far as gilt-edged securities, at all events, are concerned has been small. Consols certainly have fallen about I, but the Five per Cent. War Loan is only down, and this notwithstanding the extent of the recent rise. On the other hand, some of the Industrial descriptions have suffered in connexion with a few dis- appointing dividend announcements, and some of the speculative markets have been weakened on Conti- nental selling, rubber shares in particular being affected by some forced selling from Amsterdam. Nor, in con- nexion with the Continental selling during the week, should the fact of the Norwegian banking crisis be left out of consideration. In spite, however, of this combination of unfavourable factors during the week, markets have held their own remarkably well and, as indicative of the response still given by the investor to sound issues of capital, it is sufficient, perhaps, to men- tion that a New Zealand loan for £4,000,000 in Four per Cents. at the comparatively high price of 92 has been successfully floated. For the moment, in fact, it is a pause in activity and a more hesitant tone which has to be reported in the Stock markets rather than any actual pronounced weakness.—I am, Sir, yours faithfully,