FINANCE AND INVESTMENT
By CUSTOS
THESE are trying times for stock markets. No sooner does a little patch of blue brighten the sky than it is obliterated by a rolling cloud. The Nazi regime is again justifying its reputation for being " an international pain in the neck " and it is proving a very expensive pain for ourselves. Nobody suffering from this affliction can get on. with his job and there is plenty of evidence, which is focussed in the City, that all sorts of legitimate commercial and financial activity are being inhibited in this country by these recurring stresses and strains in European politics. This week even Wall Street has not stood its ground, although I feel that the American market was due anyhow to go through one of its periodical " technical reactions." The latest industrial bulletins from the United States carry on the story of steady improvement and I shall be surprised if both the business and stock-market recovery does not make further progress during the next few months.
The real disappointment is the check to the incipient recovery on this side. Improvement here was obviously a tender plant but was just beginning to show signs of sturdier growth. It is now looking a little blighted by this chilling blast from Germany. So far, selling has not been heavy, even in the gilt-edged market, but the buying move- ment has been effectively halted. The City's unfavourable reaction to the German developments is natural and unavoid- able since they obviously call for a readjustment of appease- ment hopes. My own feeling is that the market has probably already lowered quotations sufficiently to cover the increase in the political risk but the sudden re-emergence of the risk is itself a warning that investors and speculators should continue to go warily. * * * *
FRANCS, STERLING AND THE GOLD PRICE
It is a pity from two points of view. that M. Reynaud's plans for French trade and finance should have coincided with this fresh malaise in Europe. The psychological effect of the plans has been impaired and the movement of French money from London has thrown an extra strain on sterling and the gilt-edged market when they were already on the de- fensive. Still, the plans have, on balance, been well received— they tackle France's problem on radical lines—and have already induced some millions, possibly £ro,000,000 to Lis,000,000, of the more volatile French money in London to go back to Paris. More than that at this stage cannot be expected ; the real reflow of money to France will not take place until it begins to be apparent that France herself has the moral courage to accept the Reynaud plan by tightening the belt and working harder.
Meantime, however, the franc has recovered its poise and the pressure has shifted to sterling. Just what influences activate the Exchange Equalisation Funds from day to day can only be surmised but it appears that the French Fund has been converting most of the sterling offered to it this week into dollars ; hence, with sterling already rather under the weather in consequence of a general westward drift of mobile funds, the New York rate has actually fallen below 4.70. This decline in the pound should not, in itself, be very worry- ing, except, perhaps, to the United States, while it is obviously a " bull point " for gold and for gold shares. The price of gold has now risen to over 148s. an ounce, thus justifying the hopes of those who have consistently predicted a deprecia- tion of sterling in terms of the metal. I have been reading this week a very lucid and able exposition of the gold problem prepared by the Keystone Group of Unit Trusts which I commend to all investors. It is not merely a well-reasoned argument in favour of a rising gold price but a veritable mine of information on the history of the metal. It also contains some very useful statistics.
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IMPERIAL AIRWAYS FUTURE
The City has been gradually preparing itself for a clos;,- linking of civil aviation with the Government, but few et us expected that the Air Minister would announce his plans so soon after the issue of the Imperial Airways account,. So, instead of criticising the reduction in their dividend a commercial undertaking from 9 to 7 per cent., shareholde-s
(Continued on sage xii)
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