2 JUNE 1939, Page 34



WELL, it almost looks as if happy days are here again in Throgmorton Street. Herr Hitler has allowed us to have an old-time Whit week-end, and markets have registered their appreciation in a further substantial rally over a wide front. The " bear " retreat has become a rout—there can now be very few " short " positions uncovered except among jobbers—and one by one investors and speculators are be- ginning to pluck up enough courage to stake a modest claim in what they hope and expect to be a considerable recovery in prices. Having counselled a cautious buying policy for several weeks past, during which prices have risen quite appreciably, I like the way events are moving. If rational factors still count in the international political equation, one imagines that recent developments making for a stronger democratic front must have lengthened the odds against war. That is the line of reasoning the market is following, and I think it is sound.

I must add the caveat that international politics, the market's enemy No. r, are still capable of giving recovery a stab in the back; hence the desirability of continued caution. It is also just as well to keep in mind that American business, which remains a key factor in assessing the prospects of international trade and commodity prices, is showing signs of floundering. Since January the business index, so far from rising, has fallen by several points, and there are clear indications that Washington's " appeasement " policy is suspect by many groups of traders. Private capital invest- ment is, therefore, as restrained as ever, with the result that the Administration's pump-priming activities are not producing the expected effects on business as a whole. In these conditions the hesitancy of commodity shares in London is understandable. There is no logical basis yet for a recovery in these groups.