Commodities change little but remains in a soft tone in European session as the market awaits US durable goods orders and initial jobless claims data. WTI crude oil recovers to 76.3 after sliding to as low as 75.55 while gold edges back to 1235 after slipping to 1228.
Stocks fall as the FOMC statement indicated sovereign crisis in the Eurozone may hurt US growth. While the MSCI Asia Pacific Index changed little at close, European bourses open lower with the FTSE 100 and DAX losing -0.7 and -0.6% respectively while CAC 40 plunging -0.9%.
PGMs weaken further after rising to 1-month highs on Monday as renewed concerns over economic slowdown weighed on prices. Platinum plummets for a second day to a 1-week low of 1550.5 after falling -1.15% yesterday while Palladium loses for a third day to 468, also the lowest level in a week, after declining -3.18% to 474.35 yesterday.
The market had anticipated the World Cup in South Africa might disrupt power supplies to mines and thus hurt production in PGMs. According to ETF Securities, with the World Cup being held during the South African winter, 'the use of electricity is likely to exceed the previous winter peak...To ensure there is an uninterrupted supply of electricity during the FIFA World Cup, load shedding is likely to be enforced again, and therefore there is a risk we will see another price spike [in platinum]'.
However, the hope for higher PGM prices diminishes as Eskom, the state power utility company said electricity demand last week increased significantly but was still 'comfortably supplied with sufficient generating capacity'. Moreover, there has been 'no load shedding since late April 2008'.
In 2008, the 1-week power supply interruption in South Africa was a reason sending platinum to record high level. In February to May this year, speculations of power outage during the World Cup had also spurring buying interests of the metal. If power outage is avoided this time, it's likely for further downsides in prices.
Note that power disruption should have bigger impact on platinum than on palladium as, according to Johnson Matthey's 2009 estimates, South Africa represents around 80% of the world's platinum production but only around 35% of the world's palladium production.