NEW YORK, Aug. 8, 2016 /PRNewswire/ -- Commodities
decreased in July, largely driven by changing supply fundamentals,
according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was
negative for the month, with 15 out of 22 Index constituents
posting losses.
Credit Suisse Asset Management observed the following:
- Energy was the worst performing sector, down 10.69%, with all
sector commodities posting losses. WTI Crude Oil declined the most
amid increased US production expectations. Brent Crude Oil also
decreased as global excess supplies persisted.
- Livestock declined 9.25%, led lower by Lean Hogs, after the US
Department of Agriculture revised their estimated 2016 pork
production higher.
- Agriculture ended 7.42% lower. Soybean Meal declined the most
due to an improved production outlook. Losses were partially offset
by gains in Cotton, which increased due to tighter supply
projections and increased crop concerns.
- Industrial Metals gained 3.17%, led by Nickel, amid strong
Chinese demand and tightening supply conditions in the Philippines.
- Precious Metals was the best performing sector, up 4.29%.
Silver increased the most due to weaker-than-expected US economic
data and after the US Federal Reserve left interest rates
unchanged. Economic uncertainty generated by the UK's decision to
exit the EU also continued to fuel safe haven demand.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "Within
Energy, previous supply shocks began to ease. As production outages
come back online, it may take longer for demand to reduce excess
global crude oil inventories. However, the threat to OPEC oil
supplies is likely to persist as militant groups continue to target
key oil infrastructure in Iraq and
Libya, and other groups attack oil
facilities in Nigeria.
Domestically, increased US crude oil production pushed prices
lower, which may encourage producers to tighten supplies and
prevent capital expenditures from expanding too quickly. Producers
may be slower to increase hedging and restart idled production with
WTI Crude Oil in the USD 40 range, as
compared to when it was priced in the USD
50 range."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "Macroeconomic factors may also impact commodity
returns. Along with the UK's vote to leave the EU, the Bank of
England is expected to further
expand stimulus measures by cutting interest rates. Meanwhile, in
the US, the Fed indicated that near-term risks to the economy had
subsided in their July statement. However, they left interest rates
unchanged, with the market expecting a rate increase only once more
this year, if at all. With other major global central banks
indicating their bias towards further easing, it may be less likely
that the Fed will rush to raise interest rates. Amid increased
uncertainty and potential geopolitical turmoil abroad, commodities
may serve as a valuable diversification tool and help to reduce
overall portfolio risk."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy is
managed by a team with over 29 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 July 31, 2016, the Team
managed approximately USD 8.6 billion
in assets globally.
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Important Legal Information
This document was produced
by and the opinions expressed are those of Credit Suisse as of the
date of writing and are subject to change without obligation to
update. It has been prepared solely for information purposes and
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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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