NEW YORK, Nov. 10, 2015 /PRNewswire/ -- Commodities were
relatively flat in October, largely driven by fundamental factors,
according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was
slightly negative for the month, with 12 out of 22 Index
constituents trading lower.
Credit Suisse Asset Management observed the following:
- Energy was the worst performing sector, down 3.32%. Natural Gas
led the sector lower due to mild weather and inventory levels near
their highest in the past decade for this time of year.
- Industrial Metals decreased 2.81%, led lower by Aluminum.
Increased aluminum smelting capabilities out of China, the world's largest producer, raised
concerns over a deepening of the global oversupply of
aluminum.
- Livestock increased 0.77%, led by Live Cattle. Physical
deliveries of cattle against the expiring futures contract were
relatively small toward the beginning of the month, suggesting that
supplies may not be as ample as previously forecasted.
- Agriculture ended the month 1.58% higher, led by Softs, amid
unfavorable weather conditions. Sugar increased the most as
disruptive weather, potentially impacted by El Niño, including
dryness in India and excess
rainfall in Brazil, the two
largest growing regions in the world, continued to reduce sugar
output expectations.
- Precious Metals was the best performing sector, up 3.59%.
Weaker-than-expected U.S. economic data reported during the first
half of the period reduced expectations of a near-term interest
rate hike, depressing the U.S. Dollar and increasing safe haven
demand. Sentiment regarding U.S. monetary policy shifted later in
the month, leading the U.S. Dollar to recover and ultimately finish
the month stronger, while Gold and Silver still posted
gains.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "October
continued to be characterized by fundamental factors, particularly
supply surpluses in the Energy and Industrial Metals sectors. In
the near-term, weather-related risks, including the global El Niño
event, will continue to impact returns for the Agriculture sector.
Global growth expectations will also be a focus of commodity
returns. China's economic growth
fell to a six-year low as signs of manufacturing activity remained
weak, which led the People's Bank of China ("PBoC") to lower lending rates and the
reserve requirement to stimulate its economy. In Europe, although economic data indicated
modest expansion, manufacturing activity growth flattened after
gaining momentum in the spring. As a result, the European Central
Bank ("ECB") re-affirmed its commitment to quantitative easing
measures in an ongoing effort to boost its economy and minimize
disinflation concerns."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added, "Within the U.S., monetary policy may start to
shift toward tightening measures. The Federal Open Market
Committee's ("FOMC") statement released on October 28th removed the reference to
global growth concerns that the U.S. Federal Reserve cited during
its mid-September meeting, increasing expectations for an interest
rate rise to occur in December. Although the U.S. has signaled
improvement in the labor market, inflation expectations continue to
remain below the U.S. Federal Reserve's two percent target.
Therefore, despite current rate hike expectations, the U.S. Federal
Reserve may remain on a slow course toward fully normalizing
interest rates. Should the U.S. economy continue to show signs of
improvement, inflation expectations may increase faster than
anticipated."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy is
managed by a team with over 28 years of experience, 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 October 31, 2015, the Team
managed approximately USD 9.4 billion
in assets globally.
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This document was produced
by and the opinions expressed are those of Credit Suisse as of the
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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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