NEW YORK,
April 14, 2015
/PRNewswire/ -- Commodities were lower in March,
largely driven by fundamental supply factors and macroeconomic
headlines, according to Credit Suisse Asset
Management.
The Bloomberg Commodity Index Total Return performance was
negative for the month, with 17 out of 22 Index constituents
trading lower.
Credit Suisse Asset Management observed the following:
- Energy was the worst performing sector, down 9.22%, as a global
oversupply of crude oil continued to serve as a headwind. Heating
Oil also declined 11.68% as inventory levels recovered, moving
closer to the five-year average as refineries continued to operate
at high rates of utilization.
- Agriculture dropped 5.37%, led lower by Sugar. Soybean Oil was
also down after the March USDA report estimated soybean inventories
were up 34% year-over-year.
- Precious Metals was 1.81% lower for the month due to a drop in
Gold as Fed policy still seemed to be heading towards a tightening
bias, diverging from other major central bank strategies. However,
towards the second half of the month, Gold prices recovered from
intra-month lows while the U.S. Dollar reversed course from its
strong dollar trend. This was primarily due to U.S. Federal Reserve
Chair Yellen going out of her way to show that the Fed would remain
patient in adhering to its loose monetary policy, despite removing
the word "patience" from its official communication.
- Industrial Metals decreased 1.07%, led lower by Nickel.
China reduced its 2015 growth
target to 7% from 7.5% in 2014 at the beginning of the month due to
continued weak developments out of its housing and manufacturing
sectors, indicating weaker base metals demand.
- Livestock increased 1.31%, led higher by Live Cattle. Lean Hogs
detracted from some of those gains after a California port slowdown limited pork export
capabilities, causing local inventories to build.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management said: "Macroeconomic
headlines became more prominent drivers of commodities returns
during March. By the end of the period, austerity negotiations
remained ongoing between Greece
and its lenders. The European Central Bank's monetary stimulus
measures were well received by the market, but it's too early to
determine how this will affect the economic state of the European
Union and commodities demand growth. Geopolitical uncertainty
increased in the Middle East, with
Yemen devolving into a state
without its official leader and as deadlines loomed over
Iran's nuclear negotiations.
Further conflict in the region may create supply shocks for crude.
Further east, China expanded its
money supply and credit creation, potentially improving demand
expectations for commodities in the future."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added, "US economic data, including 2014 GDP growth and
unemployment, continued to be decent. However, US Purchasing
Managers Index came in lower-than-expected for March. Given that
major central banks are focused on easing to stimulate their
economies, the Fed would rather err on the side of tightening too
late rather than too early to maintain inflation expectations.
February's Core CPI (ex-Food and Energy components) was 1.7%, close
to the Fed's 2% target. The jobs market has shown signs of wage
growth, which may impact wage inflation. If payroll data and
consumer spending pick up, inflation may surprise to the upside,
which may be a tailwind for commodities."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy
has been managed for over 28 years and seeks to outperform the
return of a commodities index, such as the Bloomberg Commodity
Index Total Return or the S&P GSCI Total Return Index, using
both a quantitative and qualitative commodity research process.
Commodity index total returns are achieved through:
- Spot Return: price return on specified commodity futures
contracts;
- Roll Yield: impact due to migration of futures positions from
near to far contracts; and
- Collateral Yield: return earned on collateral for the
futures.
As of March 31, 2015, the Team
managed approximately USD 10.1
billion in assets globally.
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Certain risks relating to investing in Commodities and
Commodity-Linked Investments:
Exposure to
commodity markets should only form a small part of a diversified
portfolio. Investment in commodity markets may not be suitable for
all investors. Commodity investments will be affected by changes in
overall market movements, commodity volatility, exchange-rate
movements, changes in interest rates, and factors affecting a
particular industry or commodity, such as drought, floods, weather,
livestock disease, embargoes, tariffs and international economic,
political and regulatory developments. Commodity markets are highly
volatile. The risk of loss in commodities and commodity-linked
investments can be substantial. There is generally a high degree of
leverage in commodity investing that can significantly magnify
losses. Gains or losses from speculative derivative positions may
be much greater than the derivative's original cost. An investment
in commodities is not a complete investment program and should
represent only a portion of an investor's portfolio management
strategy.
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