FINANCE AND INVESTMENT
MARKETS are steadier after the debilde but that is the very poor best that one can say for them. To dissect a debacle may seem absurdly academic, but I think we must make the attempt. First and foremost, the Austrian coup has stuck a tremendous blow at investment confidence. As everyone knows, investors' nerves were already sufficiently frayed. but hope still flickered so long as there was a prospect of even modest progress towards European political appeasement. The City view—and I feel one may now say the view of the Government and of the vast majority of the general body of investors—is that the European political risk has suddenly increased very sharply. The appropriate market reactions are a fall in gilt-edged stocks, a movement of mobile funds out of sterling and francs into American dollars, a rise in base metals and other " war " commodities, and a general desire to hold cash rather than paper claims on wealth. All these tendencies have been in evidence, in varying degree, this week.
If it were merely a question of the political risk I feel that the situation would be disturbing but not necessarily dismay- ing, but unfortunately the economic risk has inevitably risen as well. Rearmament, it is true, is to be intensified but one cannot escape the fear that political deterioration is bound to bring a further recession in world trade, apart from which one must obviously revise one's ideas of Budget balance in the light of Mr. Chamberlain's bigger rearmament programme. The chances of a higher income tax and perhaps an increase in the scale of N.D.C. are clearly increased, although I still feel that the Chancellor of the Exchequer will strive to avoid imposing any fresh strain on business confidence.
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