LONDON MARKETS

Otago Daily Times, Issue 22956, 11 August 1936, Page 9

LONDON MARKETS

A SLIGHT NERVOUSNESS EFFECT OF SPANISH SITUATION (United Press Association) (By Electric Telegraph-»-Copyright) LONDON, August 9. The City, which was at first inclined to ignore the Spanish situation, is now becoming apprehensive of possible international complications. The presence of German warships and Signor Mussolini's chilly attitude to the French Note are considered ominous. Heavy sales of francs and the marking down of German bonds reflected the nervousness, which has spread to most home securities. The Bank of England note issue reached a new record of £454,000,000, making an increase of £42,600,000 on the year. Only a small proportion of it is attributed to the improvement in industry. At least three-quarters disappeared and has become immobilised in the form of Continental hoards. The bank return also throws a light on the authorities' determination to continue cheap money, although recent gold purchases fully offset the deflationary effects of the huge note efflux. The authorities are continuing to reduce security holdings, indicating that they have resolved to maintain credit on an even keel. The Economist comments on Mr Savage's experiments, stating that it is one of the advantages of democracy to be able to indulge in the luxury of a. reformist Government during prosperity and return to discipline and conservatism during a depression. Mr Savage's Government is engaged in the distribution of the fruits of recovery the conservative National Government secured. Mr Savage's Budget is an orthodox recovery one, enlivened with a dash of distributive taxation. Provided recovery continues, as seems probable, the modest increase in direct taxation should be bearable. Guaranteed prices for butter and cheese were evidently fixed with great caution. The success of the Government's policy wholly depends on the maintenance of the price of New Zealand exports. As long as the world recovery maintains these prices New Zealand's reformist experiment will continue under most favourable conditions. Wheat enjoyed an active week, exceptionally large trade being done in futures, but buyers were quick to take profits. There was little interest in other commodities, with the exception of zinc, which slumped heavily on reports that the Cartel negotiations had broken down. The Spanish trouble probably influenced the breakdown. There is no hope of an immediate resumption of the negotiations. The next step presumably will be the British producers' request for a higher tariff. There is little doing in apples.

Butter is slightly firmer after a quiet, dragging holiday market. The Continental market will probably have a strong bearing on the future course of values, as America, with a big shortage in production, is taking an interest in Dutch, Polish, and other descriptions, and may shortly be a heavy buyer. Britain's notice to terminate the Argentine agreement on August 7 does not imply that the negotiations have reached a deadlock. Argentina is considering the British proposals, and has devised an agreement, including a levy of three farthings per pound on Argentine beef, with a guaranteed quota of imports for three years.