Market Notes
By CUSTOS
HE overdue correction of what many pro-
fessional investors regard as a false bull market is now taking place. The prolongation of the seamen's strike, the weakness of sterling, the threat of a higher Bank rate, and the de- valuation of the Indian rupee by 361 per cent, all sufficed to bring in some nervous selling and to dry up buying orders. But the selling was not large in volume. Jobbers were glad of the opportunity to mark down prices and pick up a little stock. The gilt-edged market, after its fall, is already discounting a Taper cent Bank rate. Savings 3 per cent 1965-75, at 74k, now gives a gross redemption yield of over 7 per cent. But the volume of business is tiny. Turnover in the gilt- edged market dropped very sharply last month -the 'shorts' from around £1,000 million to £458 million and the other dated stocks from £405 million to £288 million. Stock Exchange in- comes are always the first to feel the squeeze. There will no doubt be a quick recovery in security prices on the first sign of action being taken to end the strike, but the fall in equity shares will probably be resumed as company reports begin to reflect the cut in profit margins. The Financial Times index at 358 has only dropped 4 per cent from its high of 373 on May 27 and could fall to about 348 before it reaches a resistance level on the chart. The idea that the equity market can stay up at an unrealistic level because the unit trusts:continue to, push.in buying orders will be shattered when Mr Callaghan really drops down on hire-purchase trading, raising the deposits still more and shortening the terms of -repayment, and so indirectly causing unit trust net sales to fall away.
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