NEW YORK, June 9, 2016 /PRNewswire/ -- Commodities
slightly decreased in May, driven by supply factors and
macroeconomic events, according to Credit Suisse Asset
Management.
The Bloomberg Commodity Index Total Return performance was
slightly negative for the month, with 11 out of 22 Index
constituents posting losses.
Credit Suisse Asset Management observed the following:
- Industrial Metals was the worst performing sector, down 7.27%,
with all sector commodities yielding negative returns, as demand
concerns out of China persisted.
Supplies also remained ample, broadly weighing on base metals.
- Precious Metals declined 7.07%, led lower by Silver, amid a
strengthening U.S. Dollar and Chinese industrial demand concerns.
Strong U.S. economic data reinforced expectations that the Federal
Reserve is more likely to raise interest rates this summer,
reducing precious metals demand.
- Livestock increased 2.42%, led by Live Cattle, due to improved
demand expectations as the U.S. Department of Agriculture raised
U.S. beef export projections. Recent higher prices for soybeans may
decrease beef production expectations.
- Energy ended 3.08% higher, led by Heating Oil. The U.S. Energy
Information Administration reported larger-than-expected inventory
draws amid strong demand. WTI Crude Oil also gained amid production
disruptions in Nigeria and
Canada and a decline in U.S. crude
oil output.
- Agriculture was the best performing sector, up 3.43%, led by
Soybean Meal. The USDA raised its 2015/2016 forecast for soybean
meal exports, with importers looking to the U.S. for supplies amid
lower production expectations for South
America.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "Multiple
events across commodity components altered the supply outlook
during the month. Weather played a key role in South American
production of Corn, Soybeans and Sugar. As El Niño abates, a
potential La Niña event may tighten U.S. agricultural supplies.
Supply disruptions tightened crude oil and petroleum markets, and
U.S. production declined as E&P companies adapted to lower
prices. With OPEC spare capacity at low levels, their ability to
respond to supply shocks may be challenging. This may leave
U.S. shale producers as the new swing producers, although they may
need higher prices to incentivize significant capital expenditure
increases. Meanwhile, global crude oil consumption remains robust
with the overall demand outlook recently revised higher by the
IEA."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added, "Macroeconomic risks associated with global
central bank policy also impacted commodity returns. Timing of an
interest rate rise in the U.S. may be delayed amid recent weak
employment data, as well as potential risks abroad, such as the
upcoming "Brexit" referendum and Chinese equity market volatility.
Despite the fluctuating central bank policy differences between the
U.S. and the rest of the world, overall, global monetary policy
remains extraordinarily loose as the ultimate goal is to drive up
both growth and inflation."
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 May 31, 2016, the Team
managed approximately USD 8.1 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
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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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