Market Notes
By CUSTOS
THE fall in the Treasury bill rate to f6 12s. 6d. per cent and the rise in the American bond market have helped to bring about a recovery in Government bonds. The statement of the Chan- cellor that the Treasury intends to service this month—in capital and interest—the American and Canadian loans also helped to restore confi- dence in the gilt-edged market. As for equities there has been some buying of building shares on the announcement that there is to be a relaxation of the credit squeeze for private builders but who imagines that this has been the cause of the de- cline in private house building? The high cost of new houses, the high money cost of new mortgages and the not-so-well-off feeling among potential buyers have been the cause of the private housing slump. Elsewhere the demand for equity shares has not been encouraged by divi- dend cuts and falling profits (HEAD WRIGHTSON, SMITHS CRISPS, etc.) and by the depressing reports of the steel companies. A leading firm of brokers has just issued an interesting review of The Cult of the Equity—in Retrospect' and concludes that for the time being it is dead. The depressing effects of corporation tax, which it expects to see go up, and continuing deflation seem bound to reduce the appeal of equities to all classes of investor, and especially to the institutional in- vestor whose main consideration is income. The technical 'short' position in equity markets may maintain the prices of the few elite companies whose dividends are assured but for the first time since the war the equity share group is un- likely to produce its annual rise in dividend in- come. This dramatic change in the investment climate, they contend, is bound to have a big linfluence on institutional investment policy.
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