WELLINGTON NEWS

Hokitika Guardian, 16 December 1929, Page 6

WELLINGTON NEWS

REACTION OE MARKETS. (Special Correspondent) WELLINGTON, Dec. 13. The commodity markets have reacted to the changed monetary conditions. It will be remembered that the Bank of England discount rate was raised from 4$ to oi per cent, on February 7, this being due to the money stringency in New York the result of wild speculation on the Stock Exchange. The intensity ot the speculation and its natioil-wide character together with the high rates lot call money attracted funds from all over the U.S. and Europe and gold was exported from London. Later on France and Germany made raids on England’s gold reserve, particularly France, and there followed another increase in the Bank of England rate to 6‘- per cent. There have been two reductions since of \ per cent on each occasion bringing the rate back to 5j per cent, which can by no means be regarded as cheap. In New York also the Federal reserve Bank rediscount rate was raised 6£per cent., and subsequently lowered to 4’- per cent at which rate it stands.

The effect of dear money was prompt and drastic. The speculative boom on the N.Y. Stock Exchange collapsed with a reverberating thud, and paper profits aggregating billions ol dollars vanished with electric speed. Money rates are easier in the U.S. but they are not so inEurope, and are not likely to ease for some time. Thus it will be seen that ever since February last the world’s money markets have been stringent, and the reaction on the commodity markets has been generally very severe, and prices have declined.

To emphasise this point a few illustrations may be given. The industrial metals are very sensitive, and the late Lord Beaconsfield once said that the price of pig iron was an excellent barometer of the state of trade. The industrial metals have such a world-wide application for they are required in almost all industries that they naturally become very sensitive.

fn April last copper on spot in London was quoted at £B9 8s 9d per ton. The spot*price it may be said is the cash price. Early this month the spot quotation for copper dropped to £63 16s 9d a decline of £25 12s in the last nine months. Tin has fallen from £IBO 11s 3d to £176 Is 3d a decline of £44 10s. Spelter has dropped from £27 5s in April to £2O 7s 6d now, and lead from £25 17s 6d to £2l 6s 3d, and the lookout is not promising. There are of course other factors affecting , the price of metals, and production and consumption have played an important part. Copper, for instance, has fluctuated considerably during the past few years. In 1926 The Copper Exporters Inc. was formed in America to keep price fluctuations within reasonable limits. By tbe end of 1927 this concern had by its efforts strengthened the situation and during 1928 a world-wide buying movement was in full swing the demand outrunning the production. Early this year the market was completely out of ocntrol. Aluminiums and other substitutes were utilised and copper exporters were quite unable to hold the market in check. The outlook is for increasing production as several very rich copper lodes have been located in Rhodesia and are now being developed. Tin is suffering to some extent from the reaction from high prices. Two or three years ago tin on spot was selling at over £3OO per ton and last year as much as £298 was being paid for the metal. A great deal of capital was invested in new tin mining ventures, and the output is increasing in excess of the growth of the demand. Aliminium has fallen from £125 per ton in 1925 to £95. Since 1926 production has overtaken consumption, and prices have fallen steadily. Let us pass to other commodities. Fine hard Para rubber has declined from 12R1 per lb. in April to 8-Jd now, a fall of 33 1-3 per cent., and plantation rubber has fallen from lid to Bd. In April last, jute was quoted at £32 12s 6d per ton, and the price at present is round about £27 13s 9d . Copra has declined from £22 5s to £2l 10s per ton, but copra has been on the downward trend for some time.

If we come nearer home we find that Bradford tops have declined in value very heavily. In April 64’s tops were quoted at 43£d and a few days ago the price was 33d, while BPVs tops (crossbreds) declined from 22d to 19d. New Zealand salted butter was quoted in September at 176 s per cwt and the price now is 1655. Wool and frozen meat, tallow, etc., are down. It must be remembered that all these commodities are sold in large lots, and those who make large purchases are financed by banks. When money is cheap sales are easily made, and the buyers are not very particular as to the fine shading of prices; but when money becomes dear these wholesale buyers nurchase sparingly, stocks thus tend to accumlate and prices decline. No improvement can be expected in commodity prices until the money market eases and of that there is no immediate prospect.