UK: Soviet coup a putsch in the right direction ... for Britain's arms manufacturers.

UK: Soviet coup a putsch in the right direction ... for Britain's arms manufacturers. - Gennady Yanayev and the co-conspirators behind the Russian putsch in August must rank among the more myopic short-termists in history. But it is in the financial mark

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Last Updated: 31 Aug 2010

Gennady Yanayev and the co-conspirators behind the Russian putsch in August must rank among the more myopic short-termists in history. But it is in the financial markets, as every industrialist knows, that the arch exponents of short-termism reside. Anything that pushes equities up - or down (within reason) - is good news. Stagnation is what the markets do not like, and that is pretty much what would happen if investors sat back and took a long view.

So the events of August 19 came almost as a relief in the City, like a thunderstorm in a heatwave. The market, at a record level, had been edging up for weeks with little visible means of support. Here was a welcome excuse for a panic. The Footsie duly lost 80 points - the longest one-day plunge since 1987. To the shrewd investor was this the time to reappraise defence stocks, in the doldrums since the Cold War began to melt?

The Government did its best for the arms houses. Defence Secretary Tom King announced that the defence cuts would be kept under "constant review". British Aerospace was the strongest performer that Grey Monday, losing only 1%. Next day the stock market, still highly nervous, was showing faint signs of recovery - despite clashes in Moscow. With the prospect of another period of grim-faced old men in the Kremlin, defence stocks did better than most. Vickers put on five points.

By Wednesday, Gorby was on his way back and so was the market. The armourers alone were being held back. Relative to the index, most of the bigger ones went on losing ground for the rest of the week, though interest recovered slightly on the Friday - by which time the Footsie had climbed to yet another boring peak.

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