NERVOUS MARKETS

New Zealand Herald, Volume LXXV, Issue 23218, 12 December 1938, Page 7

NERVOUS MARKETS

UNEASINESS IN LONDON INTERNATIONAL PROBLEMS REACTIONARY TREND DEVELOPS (Received<-December 10, 5.5 p.m.) LONDON, Dec. 0 The markets have shown a sharp recrudescence of political apprehension, due to the views of Mr, O. Pirow, South African Minister of Defence, on the Franco-Italian bitterness. The stock markets were heavily affected. Whatever the dictator's intentions are it is feared that the extensive press polemics will cause repercussions on nervous hivestors. Accordingly dealers are shortening, sail. Suspicion also is growing stronger in respect of the much-discussed upward trend of trade, which may be retarded. Recent favourable reports are now seen to reflect the immediate post-Munich period, in which confidence was restored. Increased Unemployment The increased unemployment is attributed to a new slackening of trade owing to the diminution of hopes of appeasement. Moreover, decreases in the rail traffic, adverse revenue returns, a large fall in clearing bank advances, a drop in motor registrations, drooping commodity prices, and a lack of stimulating trade news from the United States are also regarded as significant factors, although it is pointed out that there is a liquidation of shares for cash, which is customary at Christmas time. When the stock market- fall developed in the middle of the week, resistance to the downward movement increased and there was no selling. Most, stock brokers report that the public is less interested now than at any time since 193*2, although in some quarters the opinion is held that the markets will soon recover. War Loan and Consols Lower The market for giit-edged securities closed under reactionary influences. British War Loan, 3J per cent, on last week was £l down at £9B 2s 6d and Old Consols 17s Gd lower at £7O ss. Foreign bonds were weak. Wall Street's hesitapcy caused a sluggishness in Transatlantic issues.

The feeling in industrials was illustrated by the shares of Swan, Hunter, shipbuilders and engineers, which rose only a few pence following a £1,800,000 sterling order from Turkey and subsequently reacted in spite of an order for a further motor-ship. The stock of Dorman, Long, iron and steel manufacturers and engineers, and similar issues lost over Is. Gold shares suffered 011 selling from Paris.

The international situation and political uneasiness abruptly changed the sterling franc trend of the middle of the week. Previously the Continent was bidding for sterling and gold dealings dwindled to the lowest point since April. But on Thursday the demand for dollars revived, repatriation ceased and gold-hoarding recommenced. Exchange Control Criticised

Some quarters criticise the exchange control's policy, declaring that the weakness of sterling and the franc could easily have been foreseen and therefore it is in the national interest that Stock Exchange losses should bo recouped in the foreign exchange market at the expense of the exchange fund.

The increase in the Bank of England fiduciary circulation surprised the city as it was made later than last year, when the increase of £20,000,000 was unnecessary, It is pointed out that this year's note circulation is lower and that the seasonal expansion is unlikely to reach last year's figure. Therefore there was no reason to increase the fiduciary total for purely seasonal reasons, but it is believed the move was made in order to accustom the public of the country and outside to the idea of changes in fiduciary circulation. as the unquestioning acceptance of them may be necessary in the not distant future*