BUOYANT MARKETS

Evening Star, Issue 22229, 6 January 1936, Page 7

BUOYANT MARKETS

BRITISH TRADE SUMMARY SITUATION IN EUROPE CAUSING ANXIETY BUTTER PRICES IMPROVE Press Association—By Telegraph—Copyright LONDON, January 4. Markets entered the new year cheerfully, fortified with most pleasant recollections of 1935, in which industrial activity shook off all hesitancy and proceeded to surpass tho 1929 high levels. A total of 340,000 more persons was employed in building construction and created new records in the steel industry, which was almost embarrassed by new business towards the end of the year. The volume of transactions on the Stock Exchange .was about the same as in 1934. Government bonds were irregular and fell almost nninter- - ruptedly for the first nine months steeply, but only partially recovered thereafter. These movements do not offer conclusive evidence of future cheap money, as the recent firmness was largely due to technical considerations. The general opinion among city businessmen is that cheap money has reached its peak. ■ Oil companies had the most profitable year since 1930, non-ferrous metals were sounder aH round, and rubber was disappointing. New capital issues were almost threequarters of those in 1929. Empire borrowing was disappointingly low, only £15,000,000, compared with £29,000,000 last year and £63,000,000 in 1928. Foreign lending shrunk to vanishing point owing to the continuance of the Treasury embargo. The immediate outlook appears to bo bright, and the reports of. bank chairmen are certain to be favourable. Further advances in industrials arc probable within the next few weeks. Long-term prospects, however, are obscure. EUROPEAN SITUATION. The European situation is causing tho gravest anxiety. Italy cannot escape bankruptcy, whatever the Abyssinian issue may be. Germany’s condition is equally desperate and tho increase in the number of unemployed, the breakdown of foreign trade,- and the scant wages paid to those in employment suggest a serious crisis in 1936. The, ‘Economist,’ in its monthly trade survey, points out that while further recovery will depend on international events, it is encouraging that the index of business activity remains unchanged at September's high level. All sections of engineering are making the greatest headway since 1929, and the revival in textile trades is marked, especially in wool, where it is largely due to the rise in raw materials. A feature of the past few weeks has been the scramble for coal as an insurance against a possible strike. The commodity market, especially is more bullish and more sober. Attention in the wool trade is concentrated on Australian sales,, and users are hoping that tliep robalilc increased demand will not send prices above a reasonable level. BUTTER. Contrary to expectations, butter has risen sharply. Considerable quantities of Australian have been withdrawn from sale, 1 the demand being sufficient to take care of current arrivals and warrant higher prices, especially as it is anticipated that only 2,000 tons of Australian butter will be shipped ftom next week. Baltic butters are also short. An improvement in cheese has also materialised. While the trade does not expect the higher levels to continue indefinitely, it anticipates a fair average season around 54s to 56s for New Zealand white and coloured. COLONIAL MONETARY MANAGEMENT. The Midland Bank review, surveying tho Dominion monetary policy, declares:—“Deflation, arising from the decline in sterling reserves in 1935, if permitted to continue, might have had dire results, especially in : respect to banks, which were forced to sell securities. Fortunately the 1935-36 trading season may prove more profitable for Australia, leading to restoration of the London funds and easing the internal monetary situation. Some deflation will possibly be necessary, but it might well have serious effects on trade and industry if it is continued. There is a strong case for monetary management' whereby the Government and the Central Bank, acting in concert, could mitigate tho deflationary consequences of a shrinkage in,tho London funds. Such deflation as may be required should be achieved through the curtailment of advances to importers, not. by the restriction of the supply of Treasury bills. The banks’ facile notion of Australian, New Zealand, and South African pounds being ‘ normally ’ on a parity with sterling is untenable. Eacli unit must be regarded as separate and subject to independent management without a fixed relationship to sterl-, in g-”