ASPECTS OF THE CONTINUED DECLINE
By Our City Editor Once again the brighter promise at the conclusion of the preceding week, including some good absorption of gold shares, failed to survive the week-end, due largely to a further setback on Wall Street. Markets in general opened the past week with considerable uncertainty, which quickly descended into weaknees under the influence of a further pronounced break in all leading commodities. Base Metal and Rubber issues were especially depressed on this account, although Tuesday's recovery in commodity prices minimised losses.
Gold shares failed to maintain initial resistance on the continued scramble for the metal, and the rise in premium over the American buying price. Following a steadier trend on Wall Street, subsequent conditions have tended to improvement, although Oils suffered from forced liquidation from Continental sources. Selling in particular of Royal Dutch was attributed to speculative difficulties in Amsterdam, but this is now thought to be at an end. Although the Gilt-edged stocks resisted the generally lower tendency, they failed to show any notable gains on the week.
Commodity Prices and Speculation
Recent persistence of weakness in the prices of principal commodities, notably Tin and Copper, is now competing with international politics as the chief cause underlying unsettlement both on Wall Street and the Stock Exchange. This weakness is partly attributable to the slowing sagging production activity of leading U.S. industries, but, possibly to a larger degree, to the repercussion of past speculation in the commodities themselves. Especially in the case of the Base Metals, forward speculative purchases have only recently matured, with the result that the " bulls" have been faced with heavy losses, owing to decline in prices well below those at which they committed themselves. Commodity demand for industrial purposes is small compared with the speculative turnover, and in the present circumstances industrial absorption is likely to be of a handto-mouth character.
It is a point to note in assessing the outlook for the Northern Rhodesian Copper industry, that production is almost wholly of electrolytic copper, which is usually priced about £4 in excess of the standard metal. With production costs averaging about £24 per ton, the field's margin of profit is still substantial at about £20 per ton, even assuming that the metal fails to experience early revival from the present depressed level.
The Market Maze
The present condit'ion of the Stock Markets may be aptly likened to a maze in which we arc continually seeing the prospect of a clear course, only to meet with the
reversal of a blind-alley. The market mentality is one of complete demoralisation, owing to the obscurity of the world political outlook. In the grip of a depression complex, all views are biased for the worst, and dealers give ready credence to factors of an adverse character, while ignoring the appearance of brighter points in the situation.
In these circumstances, it is difficult to foresee any early, sustained improvement, unless stimulated by a peace settlement either in China or Spain. Apart from this, it is not improbable that some moderate invigoration might result from continued
demand for Gilt-edged, which would no doubt reach an eventual stage of overflow into leading, internal Industrials. Another key factor in the situation is the probable action by President Roosevelt towards ending the recent trade recession in America. Ile is already having a series of conferences with economists and advisers with a view to finding means of stimulating further activity.
The recent sharp fall in the Ordinary shares of Mexican and Canadian Eagles is attributable to fears in connection with the news of the seizure of certain land belonging to the Standard Oil Company of America by the Mexican Government. I learn on good authority, however, that this report gave an entirely erroneous impression, as the Mexican Government had already arranged to exchange this particular area for other leases. The report occurred on the passing of the decree ratifying the return of the land to Government ownership. Needless to say, the Mexican Eagle Company in any case had nothing to do
with the affair. From a speculative point of view, the shares appear attractive at the reduced level.
On Tuesday last I heard of good buying of Royal Mail Lines among Shipping issues. These showed a small advance in an otherwise easy market.