BRITISH TRADE

Hokitika Guardian, 7 May 1930, Page 7

BRITISH TRADE

FORTNIGHTLY REVIEW.

REDUCTION OF BANK RATE surprises city.

LONDON, May 3

The reduction of.the Bank rate came .as a surprise for the position of sterling exchange did not justify the move, all recent exchange movements having been against sterling. Consequently there has been some divergence of opinion as to the cause which induced the Bank to lower the rate. In some charters it-is suggested that the reduction, coming as it did practically simultaneously with similar movements in New York and Paris, was the result of Central Bank operations, and pointed to the preparation of the ground for the impending Reparation Bond issue.

Another theory advanced is that the reduction, was made to facilitate a big conversion here. The latter does not seem a very probable suggestion.

The financial editor of the “Morn ing Post” writes: “We do not believe for a moment that the present occasion could be described as a suitable or even a possible one for a large conversion operation, for the Budget has made far too profound an impression for that event to be possible on lilies profitable tp the Exchequer, though, of course, there is always the possibility of small conversion operations and of the Government's dealing with the 4 per cent, tax-compounded loan, which can now be repaid at any time on a few month’s notice.” An. immediate effect of the reduction of the Bank rate on the Stock Exchange was a spectacular advance of almost all gilt-edged securities. ' The reduction being regarded as an indication of the prospect of a long period of cheap money, brought a number of buyers of high-class securities into the market and dealers were apparently caught short. Unfortunately Dominion stocks were not in favour, for they showed little improvement. So far activity has been confined to British funds, and most other markets are still depressed, industrials being especially dull. The reduction of the Bank rate came too late to affect cash applications for the Quensland loan;, the list for which closed on April 30th., but it is expected to help the conversion, which closes on May 6th., and a successful result for the issue is generally anticipated. The. New Zealand loan of £5,500,000. bearing interest at 5 per cent, and to be issued at £99, which will be advertised to-morrow, will no doubt benefit from the reduction, and is likely to go well. It is repayable in 1949 and yields the investor £5 Is Bd. per cent. Existing New Zealand 5 pei cents redeemable in 1946, are quoted at just over £lO2, but this price includes four months’ interest.

DAIRY PRODUCE,

The demand lor butter has not been maintained, the advance in prices bavins: checked operations. According to “Tho Grocer,” a trade newspaper, the advance was brought about by, speculators some of whom were averaging down the cost of high-priced stock, and, by others who had been caught -on, shnn sales, “The Grocer” adds: “A review of the situation is again necessary in order to inspire confidence. This can only be dene by sellers meeting the buyers in a friendlier way, for, with the large European make now in sight, it, would not be wise to foster extravagant prices ” •

CANADIAN TARIFF

The Canadian Finajneo Minister’s Budget statement announcing increased preferences for British goods has been received with satisfaction here, but it is likely to meet with a different reception in Australia and New Zealand, for the Minister announced an increase in the duty on Now Zealand butter from one cent, to four cents a pound. Interviewed regarding this, Mr W. a, Toms, chairman. of the New Zealand Dairy Produce Board, states that the increase must have a seiious effect on the rapidly growing interchange of commodities between Canada and New Zealand. He is strongly of the opinion that it may lead to a corresponding increase in the duties on Canadian goods entering New Zealand. He added ffiat with the tariff barriers arising in many countries against New Zealand’s primary products, any retaliatory- steps the New Zealand Government might take Would have the backing of the whole community in the Dominion.

WOOL PROSPECTS

The prospect of the next wool sales opening on May 13th. is generally regarded favourably. “The Economist” says: “It is expected that values will be firm, with possibly a slight advance on certain classes. There is no doubt, whatever, that, but for labour troubles a substantial improvement in trace would have been seen during the interval, compared with previous months. Even now there are indications of a very encouraging character and as soon as the dispute is settled an effort will be made to regain the lost ground. Unfortunately the best' time of the year for the execution of summer repeat orders is passing, without any opportunity being provided for home export orders to be dealt with.”