The gravity of the worsening nuclear situation in Japan was underscored by a rare overnight television address to the stricken nation by Emperor Akihito. The series of fires and ebb and flow of radiation levels in and around the compromised reactors at the Fukushima complex has prompted the Nuclear Safety Authority in France to elevate the severity of the disaster to a “7” – a rating that would place it on par with the Chernobyl accident that took place in 1986. The rising radiation levels have now hampered rescue and recovery efforts over a wide area, as did near-blizzard conditions in some quake-affected regions of Japan. More than 11,000 are thought to have perished in the catastrophe, when the still missing souls are factored in and presumed dead.
The International Energy Agency, on the other hand, disputed that stark assessment and said that there should be no comparison made as yet between Fukushima and the meltdown at Chernobyl. While the agencies squabbled over the scale of the disaster, people from Siberia to Texas were scouring health food and drug stores and cleaning them out of the sodium iodide pills that could prevent the development of thyroid cancer in the event of exposure to nuclear radiation. Flights into Tokyo are becoming a scarce event for many airlines and a raft of foreign embassies have either suggested or ordered their staff to depart Tokyo.
Despite the aggravating situation in the country, Japanese equities staged an overnight comeback and recovered some 5.8% of the staggering losses they sustained on Tuesday. The same can be said about various commodities, which also turned higher on Wednesday, but whose market participants remain as nervous as can be and have kept a steady finger on the “Sell” button since last Friday, just in case. Much of today’s rebound was attributed to MENA tensions as it was Bahrain’s turn to make headlines in that turmoil-laden region.
There is as yet no clear view and consensus on what the short- and medium-term impacts of the Japanese disaster are on base and precious metals, energy, and other commodities. For the time being, price recovery is manifest, but one can expect plenty of volatility and irrational market responses to yet materialize. The news headlines yet to come will be the defining price-moving agents in these markets and overreactions will continue to be the order of the day(s). For now, the focus is also on trying to estimate the ultimate costs of the event. Analysts have thus far pegged the size of said costs anywhere from $125 to $250 billion and they expect a Q2 GDP contraction to become a reality for Japan’s economy.
The midweek spot market precious metals dealings opened to the upside in New York. Playing roughly equal parts in the morning’s gains were the basic and to-be-expected knee-jerk type of rebound that normally follows a very bad previous session, the Moody’s downgrade of Portugal’s debt, and the flare-up of violence amid protests in Bahrain. Col. Gaddafi also appeared to be edging closer to fully smothering the uprising in Libya. This, even as the Arab League suggested that it is willing and ready to intervene militarily in that country (something the West and the UN have dithered on for weeks now).