DEFENCE AND GILT-EDGED,STOCKS
As for the raising of the £35o,000,000 by public loans; this is obviously a pretty tall order. Estimates of the annual national savings are admittedly tentative, but I doubt whether there can be much margin of savings available for this purpose ; it is certainly true that if the general body of investors are to be attracted, as they ought to be, the terms will have to be reasonably generous. My own feeling is that such a formidable piece of financing should be tackled in instalments and that different types of securities should be offered at different times. When a start should be made seems to be a question on which some of the Treasury's critics hold strong views. Let a beginning be made now, they urge, so as to encourage the success of the later issues. I cannot think this is good advice, much as I admire the businesslike and bold spirit which prompts it. As I see it, the market atmosphere is at present far from favourable, for any large-scale or even medium-sized Treasury operation, and it is hard to imagine that there will be any genuine change for the better during the politically dangerous months of August and September. If there should be war, well, the Government will have to get its money as best it can ; if political events move favourably, there is bound to be a big improvement in the stock markets in October. So why hurry?
Looked at from this angle the Defence borrowing problem, large as it is, should not be interpreted too dis- mally in the gilt-edged market. There is no urgency about the Treasury's requirements in the matter of public loans, and, as I have said, if we get through August and September without war (and without any cowardly peace) City senti- ment, for want of a better phrase, will change and we shall see better prices. In that sort of atmosphere I should ex- pect gilt-edged stocks to rally at least a few points from today's levels so as to allow the issue of a 31 per cent. long- dated loan at a price, of, say, 96. I see no reason, therefore, why those whose position compels them not to venture outside the fixed-interest field should feel alarmed. As for the equity share outlook, it is obviously very promising indeed if politics give markets a sporting chance. British industry, taken as a whole, is doing well, and at last there are signs of a pick-up in trade in the United States, which, if it really gets under way, will help many of the leading commodity markets. I cannot imagine, however, that this latest spectacular rise on Wall Street is based entirely on trade influences even after making full allowance for tech- nical conditions which have made prices abnormally sensitive to moderate buying. It rather looks as if Wall Street has got' a hunch that European politics are shaping more pro- misingly. London has indulged hopes so often it recent months that it is understandably hesitant to follow Wall Street's lead, but it is creeping up cautiously and is as anxious as ever to get the " All clear."
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