NEW YORK, Feb. 9, 2017 /PRNewswire/ -- Commodities
slightly increased in January amid the changing global political
environment and uncertainty surrounding the path of energy prices,
according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was
positive for the month, with 13 out of 22 Index constituents
posting gains.
Credit Suisse Asset Management observed the following:
- Industrial Metals rose 7.45% due to a weakening US Dollar and
greater-than-expected increases in Chinese manufacturing data for
the month of December, supporting increased demand expectations for
base metals broadly.
- Precious Metals gained 6.27% as the US Dollar gave back some of
its recent strength and amid increased uncertainty surrounding
future US economic policy.
- Agriculture was 3.32% higher, led by Coffee, after Brazil's main growing region continued to
suffer from arid conditions, potentially affecting crop
yields.
- Livestock eased 1.32%, led lower by Lean Hogs, amid concerns
regarding the sustainability of strong US pork exports, which began
in the spring of 2016.
- Energy was the worst performing sector, declining 7.60%.
Natural Gas decreased as most of the US experienced
warmer-than-normal temperatures throughout the month, weighing on
heating demand and increasing end-of-season storage level
expectations.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "January
featured increased uncertainty surrounding the global political
environment as the new US administration stepped in, and 'Brexit'
negotiations and election processes in major European nations
accelerated. The global economy can potentially see a big shift in
government policy-making. Already, a view towards stricter
environmental standards out of China and the
Philippines has reduced expected supplies for certain base
metals. Tightening global supply balances will likely be a feature
of the first half of 2017, with upcoming major labor contract
renegotiations in Chile and
weather-related impacts starting to affect certain agricultural
commodities. In oil markets, the impact of the tightening will be
dependent on the compliance of the coordinated cuts and the
significance of the US producers' response. As of the end of
January, there remained significant uncertainty on some potential
US policies that may impact crude oil and the petroleum markets.
However, the energy returns will most likely be driven by
fundaments and changes to production from key
producers."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "Inflation pressures remain generally mild for the
Eurozone, Japan and other parts of
Asia. Within the US, many signs
point to the potential for higher inflation. US job market and wage
growth data indicate the labor market may already be at or near
full employment. With the new US administration focused on job
creation and increasing economic growth, trends in increasing wages
and prices may accelerate. While markets await further
details on these programs, deregulation, infrastructure spending
and tax cuts may be inflationary. In response, the US Federal
Reserve may be mindful to not raise interest rates too quickly.
Commodities may serve as a good hedge against potential unexpected
inflation, especially during this time of uncertainty."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a
team with over 30 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 January 31, 2017, the Team
managed approximately USD 8.8 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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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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SOURCE Credit Suisse AG