August Sees Further Consolidation in Commodity Markets

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Sep 10, 2014, 09:55 ET

NEW YORK, Sept. 10, 2014 /PRNewswire/ -- August was a mixed period for commodities as the market saw further consolidation, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was negative for the month, with 13 out of 22 Index constituents trading lower.

Credit Suisse Asset Management observed the following:

Livestock was the worst performing sector, down 4.18%, led by Lean Hogs. A decrease in demand expectations due to Russia's ban on US pork, coupled with reduced cases of PED Virus continued to add to downward pricing pressure.
Agriculture decreased 2.25%, led lower by Soybean Oil. Wheat was the only grain to end the month in positive territory amid concerns that supplies from the Black Sea region might be disrupted due to escalating tensions between Russia and Ukraine.
Precious Metals declined 1.00%, led lower by Silver. While Gold was supported by geopolitical uncertainty, the strengthening US Dollar and slowing physical demand weighed on Silver.
Energy ended the month 0.22% lower despite the strength in Natural Gas. Brent Crude Oil declined on perceived weakness in the Eurozone, while WTI Crude Oil declined after the Energy Information Administration reported Cushing inventories increased for three consecutive weeks.
Industrial Metals was the best performing sector, up 0.48%, supported by strong PMI reports out of the US.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: "August was a mixed period for commodities as the market saw further consolidation. Idiosyncratic risks continued to drive returns. Weather-related risks also continued to subside as temperatures across the US supported positive growing conditions for crops. Crude oil supplies held steady despite economic and geopolitical risks that have been threatening production. However, the impact of geopolitical risks may materialize over the near future. For example, wheat remains vulnerable as the situation between Ukraine and Russia may worsen, while Brent crude oil could increase if pipeline or supply disruptions materialize in the Middle East."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "The global growth outlook is slowly improving, including that of China and the US. China Service PMI beat expectations after a nine-month low in July, reflecting a rebound in China's services sector. Despite underwhelming GDP earlier in the year, recent US economic data has been positive, including core inflation heading towards the Federal Reserve's target and an improvement in labor demand. The Federal Reserve continues to be committed to improving unemployment and comfortable with inflation running higher than its 2% target. We believe the possibility of higher than expected inflation remains and investors may continue to benefit from a commodities allocation as part of a diversified portfolio."

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for over 19 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 August 31, 2014, the Team managed approximately USD 11.2 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 date of writing and are subject to change without obligation to update. It has been prepared solely for information purposes and for the use of the recipient. It does not constitute an offer or an invitation by or on behalf of Credit Suisse to any person to buy or sell any security. Any reference to past performance is not a guide to future performance. The information and analysis contained in this publication have been compiled or arrived at from sources believed to be reliable but Credit Suisse does not make any representation as to their accuracy or completeness and does not accept liability for any loss arising from the use hereof.

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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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SOURCE Credit Suisse AG