Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-06-28
Commodities Are Especially
Benefited by Rapid Ad-
vance in Prices.
PSYCHOLOGICAL EFFECT
HAS BEEN WIDESPREAD
German Sentiment Undergoes
Swift Change-Business Outlook
Greatly Improved.

Special Dispatch to The Star.
NEW YORK, June 27-Cable dis
patches to the Business Week give the
following swift survey of business abroad
for the week ending June 81:
Eur0pe.-President Hoover's morato-
rum proposal unleashed dynamic re-
action of European stock markets,
reaching in Berlin the extreme Of IS
per cent in one day. Commodities like
wise staked powerful recovery under
the leadership Of cotton and the non
ferrous metals Except TIM. Then
profit taking, coupled with uncertainty
lest the French reply prove unfavor-
able and opposite anxiety for govern
ment stability in France should the
reply be considered too favorable by the
excited Chamber of Deputies, brought
a reaction Tuesday. There we're indi-
cations, however, that the rise in COM
modities was more basic in character
than speculative. Notwithstanding
ground lost from their peaks by indi-
vidual products Cwheat, rubber, cot
tom. average prices for a range Of food
Stuffs, textile hbers and metals held a
net per cent gain through the re-
action and at midweek had resumed the
advance.
Hoover Proposal Acclaimed.
The most important development has
unquestionably been psychological.
Europe has long believed that a respite
from reparations and war debts, even a
scaledown, was an essential to recovery
from depression; has realized, however,
that collaboration of the worlds prin-
cipal creditor was the first requisite
The unexpected initiative taken by
President Hoover and wide indorSement
in the United States Of his action have
overnight e1Nnged European sentiment
from one of dependency, that nothing
would be done, into confidence. that
now, with awakened American under
standing, much Is possible.
This reversal Of sentiment has brought
with it IS own obvious danger. The
Hoover proposal will inevitably encoun-
ter difficulties in the cour1e Of applicA-
ton to so many different countries and
conditions. With each difnculty any
overhopeful sentiment viii be subject to
sudden n1iSg1vings, reflected In market
irregularities. The prospect for coming
weeks Is one Of volatile movements.
The change particularly In German
sentiment Is described by local observer
as almost miraculous. From q c0ndi.
ton threatening imminent political and
social upheaval-an upheaval which
would have entrained economic chaos
and worldwide repercuEsions-the Situ-
alton has changed overnight to one Of
almost dangerous enthusiasm and re-
lief. To cap the climax. it has been
simultaneously announced that pro-
tracted negotiations between Germany
and Rumania have eliminated in ia
vorable tariff treaty. This treaty With
a country under the political and fnan-
cial aegis OF France is taken as another
indication that Germany's isolation, felt
by the German people to be actual i'm
prisonment and subjugation. Is passing.
Perhaps the most important ultimate
effect of Hoover'S proposal will be in
better future collaboration between
France and Germany, although momen-
tarily France is the uncertain crux of
the moratorium scheme. Her prelim-
mary reply, rejecting a moratorium for
that part Of repaations which are
claSsad as -postponable in the
Young plan, will, if insisted upon, en-
tail modification Of the Hoover for
mula and will somewhat restrict the
intended benefits.
Paris-Despite the uncertainty over
Frances final reaction to debt revision,
markets this week are beginning to re-
feet. at least temporarily, the burst
of optimism which has stirred business
in practically all countries.
The change in trend. however. Is yet
TOO new to alter appreciably the de-
f1ation cycle through which the ccun-
try is passing. And because deflation
has come to France so much later than
to the rest of the world. it cannot yet
be expected to have run its course.
Trade Report.
Industrial and foreign trade reports
bring little encouragement. April pro-
duction indiceS showed industrial ac-
tivity was slowly but steadily declining,
though the general level is still COM
paratively high. The drop was most
pronounced in the automotive indus
tries. May results are expected to be
even worse. Building, mining and the
metallurgical industries showed smaller
declines Rubber and leather main
tanned March production levels.
Unemployment declined another AZ
per cent this week. but any favorable
reaction was nullifed by the serious
turn in the textile strike.
BerIin-After last weeks panicky
frenzy and Mondays jubilation over the
prospects of a moratorium, business is
computing its losses and settling down
to more normal conditions.
Total Reichhank losses in gold and
gold exchange UP to June 20 are eSti-
mated at $50 millions, which reduces
the banks gold reserves to 385 millions.
With note circulation at $40 millions.
the ratio is dangerously close to the 40
per cent legal minimum. Although the
position now is relieved all sSoun5- the
per cent bank rate Is likely to BE-
maintained pending definite acceptance
of the Hoover plan by all creditor
countries. Credit restriction already Il
materially relaxed and may be aban-
dcned as business returns to normal.
While business eagerly is looking for
ward to the effect of the suspension Of
reparations on the capital market. for
eign exchange and current industrial
activities so far are little affected by
the recent financial upheavel. Steel
and chemicals in June have continued
the May upturn.