Market notes
CUSTOS
This should have been a quiet week in the City but it has been far from that. First, and most „important, there was the agreement reached by the ten rich nations of- the world—the Group of Ten—at Lancaster House on Satur- day. The commitment to a new form of inter- national reserve proved a tonic for sterling and bad news for gold shares. Of course second thoughts will bring sterling back again, for there is nothing in the new agreement which helps the British reserve position in' the short run—and by short run I mean 1967 to 1970, which is long enough.
The reasoning in the kaffir market was more compelling. New international reserves mean less need to raise the dollar price of gold. In that there is some sense though if the Ameri- cans fail to lick their balance of payments prob- lem, speculative pressure will build up in the bullion market once again and take gold shares with it. At all events there was some attempted heavy selling of Cape issues on Tuesday. 'Writs' 'dropped 5s to 100, Western Deep fell back 3s 3d to a new low for the year. I expect the slide to last for some days yet.
Equities found no cue at Lancaster House and were not inclined to take the-ministerial re- shuffle seriously. Relaxation of hire purchase regulations covering consumer • durables— cookers and 'fridges—can only provide the market with the minutest tonic. Gilt-edged stocks are looking vulnerable. All eyes are on American interest rates though the connection between the long ends of the two markets is pretty tenuous. There are still Some hopes in London that the Presidential tax message will bring rates down in the near future. I doubt it. The tax increase will be too late and too small (less than 10 per cent) to take the pressure off interest rates. It is a conclusion which is dis- turbing for the pound as well as gilts.• f..On ,the company front; Tunnel Cement -pro- vides a bright spot. The company has decided to embark on a £7 million extension at Pitstone
in Bucks. It is a move which argues an en- couraging measure of boardroom confidence. Cash will not be a problem, for the group has a strong asset position and a decent cash flow. At 43s 6d the shares yield 4.6 per cent.
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