Evening star. [volume] (Washington, D.C.) 1854-1972, 1931-07-26
Financial and Political Crisis
Abroad Acts as Brake
on Trading.
STOCK PRICE AVERAGES
ARE RELATIVELY STEADY
Steel Dividend Action Is Expected
to Give Clue on Wage
Policy.
BY CHARLES F. SPEARE.

Special Dispatch to The Star.
NEW YORK, July $50 long as
there was confusion over the outcome
Of the London conference and the po-
sition Of Germany remained in DOUBT,
there could be no incentive for either
speculative or investment commitments
in the American market. Consequently,
a part of this week has witnessed al
most complete Stagnation on the eX-
changes. Not in five years have trans
actions fallen to such low state. With
all this withdrawal from the market by
both professionals and the public, the
price average has held relatively steady.
This is the most important fact Of all
those bearing on the situation. The po-
litical and financial crisis abroad is OF
greater scope and severity and more
far-reaching in it's effects than any one
set Of circumstances producing panic
among investors in this country on
three separate occasions since October,
1929. Yet it has been faced with sur
prising calm by people who are more
conscious today Of the bearing OF Eu-
ropean conditions on American, pros
perity than they were a month ago.
The reason for this is that securities
have been uquidated. On the other
occasions they had not been liqui-
dated. The promises for business
in the second half of the year
were better in June than they are in
July. The German crisis was known
to be serious six weeks ago, but only by
those who dealt with Germany in the
capacity Of lenders. Latterly the trou-
bles have led to inSolvencieS on q large
scale, and every one has been conscious
of Germany's plight. Still stocks hold
we'll above the minimum figures OF
June 2.
Commodity Markets Sensitive.
Commodities have not acted SO we'll
They too appeared to have been lqui-
Gated. On this assumption they en-
joyed substantial rise in the latter
part of June. They are more sensitive
to international politics and finance
than stocks especially cotton, copper,
rubber and wheat. So the commodity
average this week has been practically
at the earlier low reached in June. More
favorable symptoms have appeared in
sugar and oil. These, by small frac-
ton, improve the general commodity
status.
Speaking in terms Of merchandise,
business also appears to be nquidated.
1t has had its advance deferred by the
unexpected uncovering OF conditions OF
credit in Germany and of political
hatreds in France not realized either in
American financial or diplomatic cir
cles. It will pick up again as these are
corrected and removed for period OF
years from the catalogue OF bearish
factors.
Market sentiment was helped by
President Hoover's optimistic statement
that the program adopted at the seven
power conference in London should
expedite recovery from the worldwide
depression. The Bank of England raised
its rate in order to check the flow Of
gold from its vaults and there were
bank rate increases in Germany, Hun
gary and Austria. In the case of Ger
many, of course, the advance of the
rate was automatic with the dropping
of the Reichbank'S gold reserve to the
danger level. Apparently, however, the
Federal Reserve Bank has no intention
of advancing it's rate. This indicates
of England and the Federal Reserve.
as a parallel increase in the New York
rate would tend to nullify the beneficial
effect Of the increase in the Bank OF
England rate. The rate increases
abroad need have no sequel in further
heaviness in domestic bonds and stocks.
Steel Dividend Awaited.
The domestic event that has played
an important part in the immediate
course of the market is the dividend
action next week by directors of the
United States Steel Corporation. Per-
haps too much emphasis is being placed
on this. The Importance of the iron
and steel trade as barometer OF
general industry as not what 1t was
before the days of automobile produc-
ton. Neither is steel common the out
standing and constant leader of Specu-
lation. There are number OF corpor-
atoms that have larger shareholders
list than United States Steel. The real
of the immediate dividend
policy bears on the question of wages.
II the rate is reduced it will be not
because earnings have not been suffl-
Gent to cover the quarterly require
ment, but to allow, with good grace,
the management to begin to revise
downward the schedule of pay among
its mill forces. On the other hand,
should the current dividend be main
tanned this decision will be accepted
as an indication that wages are to be
maintained and that the directors look
for an improvement in business in the
second half of this year.
If the question of the dividend is to
be settled entirely on the basis OF earn
ings during the period ended June 80,
there would be no question as to the
outcome of Tuesdays meeting. During
the three months the average produc-
ton Of the company's plants was under
40 per cent of capacity and prices were
low. Conditions have been less salts
factory in July than in the June period,
with steel mill capacity generally at a
new low level and only so per cent of
the ratio Of year ago. Current earn
ingS, however, are not necessarily a
true reckoning on which to determine
the distribution of profits. Many cor
porations are cutting down on this dis
tribution. 1t is significant that the
number of dividends omitted is now
about balancing those reduced.
Reserves Set Aside.
This IS true chiefly of corporations
and banks that have established only
moderate reserve in the years of
plenty and have no secondary reserve
to fall back upon when gross earnings
decline, collections are slow and losses
on securities or real estate cut into un.
divided profits and impair surplus. The
situation with strong corporations like
United States Steel, General Motors.
General Electric, Standard Oil of New
Jersey, the Atchison, Pennsylvania and
Union Pacific Railroads; American
Telephone 81 Telegraph, Consolidated
Gas of New York, Commonwealth
Edison of Chicago, National City Bank,
Chase National Bank, Bankers Trust
Co., the First National and the Illinois