Market Notes
By CUSTOS
rTHE market got over its ICI shock more I quickly than most of us expected. By Tues- day the loss had been recovered. This was due partly to better feeling about the trade balance— the trade gap narrowed in August to £15 million from £49 million in July—but mainly to the belated action taken by President Johnson to curb the American inflation. The action was very limited—calling for the temporary elimina- tion of the 7 per cent investment credits and of the accelerated depreciation rates—but it was followed by the President's order to the Federal agencies to stop further market issues of bonds which had been driving up the borrowing rate. If the President wants to see lower interest rates it gives us the chance in London to stop the rot in the gilt-edged market. At any rate, govern- ment bonds responded to the welcome news and Exchequer 5 per cent 1967 were promin- ent with a rise to 97* But the 'longs' were still depressed by the coming £60 million issue of 8 per cent loan stock at 98 by ICI. As this fol- lows on the £50 million bond issue last year the market began to ask whether ICI is as well managed as it ought to be. In the first half of the year sales were 8 per cent higher but gross profits were 3.3 per cent down. For the full year the directors expect gross profits to be about 10 per cent down, which would allow the dividend to be maintained at 121 per cent but only just covered. The shares have fallen to 37s. to yield 6.7 per cent. By contrast a satisfactory report is expected from FISONS and the shares rose Is. 6d. to 38s. 6d. (yield 5.4 per cent) on the rumour of a take-over bid from America (which the company denies). Aircraft shares have become a better market, partly be- cause the Government has decided to subsidise the production of a new HANDLEY PAGE plane, partly because ROLLS-ROYCE gave a bullish fore- cast of profits on its formal offer for BRISTOL AEROPLANE. On the other hand, motor shares fell back sharply on the announcement of short-time working at BMC.
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