Commodities fall as uncertainty grows over Greek deadlock

Singapore: Commodities fell as talks to form a Greek government failed, boosting speculation that the country may quit the euro, and data from the US and Japan added to concern an economic slowdown may reduce demand.

The Standard and Poor's GSCI Spot Index of commodities lost as much as 1.5 per cent to 626.57, the lowest level since December 20. The gauge, set for to drop for the tenth day in 11 sessions, was at 627.16 at 8.48am in London. Oil fell for a fourth day in New York, trading at a six-month low, and copper dropped to the lowest price since January in London. Gold declined.

Greece will hold new elections as President Karolos Papoulias failed to form a coalition after an inconclusive May 6 vote, threatening pledged spending cuts required to secure bailouts. German Finance Minister Wolfgang Schaeuble called the new poll a referendum on whether Greece stays in the euro.

Ongoing uncertainties

"Until the Greek situation is resolved in some way, the markets are going to price the ongoing uncertainties and the risk of further deterioration in the growth outlook," said Peter Richardson, chief metals economist at Morgan Stanley.

Machinery orders in Japan, the world's third-largest economy, fell 2.8 per cent in March, after a report on Tuesday showed that US retail sales rose in April at the slowest pace of the year.

Greece's possible euro exit would hurt industrial commodity prices as a recession limits demand and investors shun so-called risky assets, according to London-based researcher Capital Economics Ltd. Top miners including BHP Billiton Ltd and Rio Tinto Group said they will slow spending in expanding assets as costs rise and prices fall in a weaker global economy.

"We should pause, take a deep breath and wait and see where the pieces fall around the world," Jac Nasser, chairman of Melbourne-based BHP said yesterday to reporters in Sydney.