Evening star., 1936-03-15
Foreign Developments Hold
Attention on Stocu and
Bond Markets.
ARMS RACE TO BOOST
BUDGETS AND TAXATION
Europe Must Bear Additional
Burdens as Nations Prepare
for Hostile Outbreak.
BY CHARLES F. SPEARE.

the tense political situation abroad
This has influenced the speculative
portions Of the stock and bond mar
kets. particularly toward the end
of the week, caused moderate fluctua-
tions in the foreign exchanges ano
indefinitely deferred any attempt al
currency stabilization.
The hope has been entertained in
this country that the crisis created
by Germanys sudden move into the
Rhineland may not be as seriou:
as at first appeared and that, out oi
it, may come some promise of pro-
longed peace.
1t requires more faith in Germany's
adherence to future contracts thar
the average person possesses to accept
this view. The obvious fact is thai
the armament of Europe will proceed
at a greater pace than heretofore
that budgets will be expanded. take:
increased and social unrest become
more intense.
Internal Burdens Grow.
Instead of balancing her budget
this year, Great Britain must provide
more capital for armies, navies and
air forces.
France. whose political situation has
been affected for months by a badly
unbalanced budget, cannot now lower
taxes to the extent promised last June
under the Laval DEGREES.
The little nation of Rumania, which
is among the defaulters on her dollar
loans. is to raise S100 900, 900 to meei
war contingencies.
Belgium. whose internal economy
had been greatly improved by her de-
valuation of the franc year ago, faces
a condition that may erase all of the
advantages gained by that act, and the
serious troubles that have severa,
times within the last IL month,
brought Holland close TO a financial
crisis will not be improved by the
latest coup of Herr Hitler.
There are, as yet, no indications
that the strained political situation
in Europe has adversely affected
American business.
The reduced momentum of industry
in the first two months of the year
has been followed, in the first hall
of March, by pickup in the durable
goods trades.
Winter Effects Seen.
II was here that the effects OF a
severe Winter were most apparent
Elsewhere trade appears to have held
close to the high levels of 1885, and
frequently to have exceeded those
volumes. Department store sales in
February were 13 per cent above those
of the same month last year. Those
Of chain stores increased per cent
The gross earnings of the railroads
showed a decided improvement over
the similar period of 1895.
Between December and the end oi
February. however, there was about
a 10 per cent drop in industrial activ-
ity. 1t is in this section of the business
world that recovery is now taking
place. This week the operations OF
the iron and steel trade moved up to
81 per cent of capacity. the best since
December. This is due to heavier
orders for March deliveries.
The automobile industry is again
going ahead at a swift pace. Col
Leonard P. Ayres, an authority on
this branch of business. predicts that
it will resume its leadership and, In
March, exceed by 20 per cent its Feb
ruary output.
Representatives of large corpora
tions are obviously giving much
thought to the possible effect on
them Of the proposed tax on un.
distributed profits. There is no sign
however, that this has caused them
to contract or abandon commitments
into which they had entered a
fortnight ago. That there will be
some easement In the original rates
on taxable incomes now seems prob
able.
Wall Street Cautious.
The caution which Wall Street has
shown this week in its market opera.
tions, in common with that exhibited
on European bourses, has been sensi-
BILE in view Of the political situation
abroad and considering the fact that
a year of rising prices has just been
completed. A review of this remark
able period may be in order.
That portion of it from March, 1885
to the end of January, 1886, is dealt
with in the February bulletin of the
Federal Reserve Board: as what has
happened in the stock market and
what may occur there in the future Is
one of the delicate matters with which
this body is concerned. The record
shows that the advance Is the most
prolonged since 1929; that, in January
the stock average was nearly 200 per
cent higher than the low average in
June, 1892; that the industrial average
in January was 16 per cent above the
average for this group in 1925, though
the railroad average was SIS per cent
lower and the average of the utilities
about on a parity with that 10 years
ago. Since January the general av-
erage of all stocks has risen about
8 points.
Bonds Reach New Peaks.
Not only has this month produced
the highest average in stocks, but the
demand for investments has been sc
great and the willingness to accept
low rates Of income return so general
that practically all classes of bonds
have reached a new level.
This week United States Govern
ment issues were one-fourth of per
cent above the high of 1885, AAA
corporation bonds showed an aver
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