Finance
The City and the Constitution WHEN the final record of Stock Market conditions during the current year is concluded, it will certainly be admitted that the firmness of prices of securities has received some severe tests during the year. From January to December, inclusive, disturbed international political conditions in Europe have been the outstanding feature, while financial and political conditions in France, even though they May have led to French money, coming to this country, have also been a disturbing influence. Hardly had the Abyssinian crisis begun to fade into the background before the outbreak of the Spanish revolution presented an even more disturbing problem.
From time to time, international politics have caused a setback in Stock Exchange prices but the relapse has 'usually been of a temporary character, and unless there are unexpected unfavourable developments during the next few weeks, there is little doubt that the year 1936 will close With a record of a general advance in Stock Exchange securities.
A FURTHER TEST OF MARKETS.
During the past week, however, a further test has been applied to Stock Market conditions by the sudden present- ment of a Constitutional problem of an unprecedented character, occasioning apprehensions of an actual Consti- tutional crisis. On Wednesday of last week, this problem first commanded public attention, though the probability of it arising had been present to the City for Many months past. When, however, last week it was seen that this problem must necessarily oceupy the foremost place in the minds of the public for some time, the effect upon the Stock Markets was immediate, British Funds falling quite heavily, while general business in the Stock Markets almost came to a standstill. It seems important to record the fact, not merely as 'accounting for the changed sentiment of markets during the week, but also because of the warning which it gave of the effect likely to be produced upon the financial situation by any develop- ments calculated to place an undue strain upon the British Constitution and its connexion with the whole Empire. No doubt, the effect at this particular moment was the more pronounced by reason of its coinciding with the unsatisfactory state of international politics, but the fact that markets which had been almost impervious to the developments on the Continent of Europe responded immediately to anything affecting political conditions at home was, to say the least, suggestive.
Moreover, it must also be remembered that, apart from international and domestic politics, all the factors operating upon the Stock Markets were, and have been for a long time past, of a favourable character. During the past few days it is possible that some trades, and especially perhaps those in which activities have been specially stimulated by preparations for the Coronation, may have been adversely affected by the political event of the week, but for the most part the favourable domestic factors, such as cheap money and active home thside, have remained in evidence, so that but for attention having been focussed for a time upon the Constitutional problem there is little doubt that prices of securities would have experienced a further advance during the remaining days of the year. The figures of Bank Deposits, Bankers' Clearings, the Active Note Circulation and the rise in banking advances, all testify to continued activity in trade ; indeed, during the past week any sharp fall in Home Securities has usually been followed by a certain amount of fresh buying on the part of those who believe that with a satisfactory settlement of the Constitutional problem markets will once again show a strong tendency. At' the moment of writing, the City is still awaiting with anxiety the nature of the solution of the Constitu- tional problem so greatly affecting the future of the country and the Empire. There has, however,. already been a material recovery in prices, led by Government securities, the recovery being due to the growing belief that unanimity in Parliament wilt avert anything in the nature of an actual Constitutional crisis.
ARTHUR W. KIDDY.
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