February Sees Fundamental Factors Drive Commodity Markets Higher

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Mar 11, 2015, 10:26 ET

NEW YORK, March 11, 2015 /PRNewswire/ -- Commodities were higher in February, largely driven by fundamental supply and demand factors, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was positive for the month, with 12 out of 22 Index constituents trading higher.

Credit Suisse Asset Management observed the following:

Energy was the best performing sector, up 8.43%, with all constituents posting positive returns. Petroleum products and Brent Crude Oil led the sector higher amid increased expectations of production cuts going forward. Notably, Brent Oil outperformed WTI Oil after the US Energy Information Administration reported an increase in US supplies for the 12th consecutive week.
Agriculture increased 2.21%, led by Soybean Oil. Ongoing strikes in Brazil's largest soybean producing region reduced export capability, increasing fears over a potential supply shortage.
Industrial Metals ended the period 1.13% higher, led by Copper, as reports of potentially more active fiscal policy out of China, including further reductions in banks' required reserve ratios and cutting of interest rates, coupled with positive preliminary Chinese manufacturing data increased demand expectations for base metals.
Livestock declined 2.66%. Lean Hogs decreased the most due to increased pork production and reduced export availability amid labor strikes at US West Coast ports throughout the month, causing local inventories to build.
Precious Metals ended the period 4.87% lower as concerns eased over a potential Greek exit from the Eurozone, reducing safe haven demand and dampening the appeal of precious metals.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: "Supply and demand factors continued to be drivers of individual commodity returns, with the main focus on Crude Oil and Petroleum Products. Cold weather in the US increased demand for Heating Oil, while Gasoline demand remained high amid decreased refining capacity. Falling rig counts and announced reductions in capital expenditures increased expectations that supply may begin to normalize. Macroeconomic headlines also had an impact on multiple commodity sectors. In the US, inflation expectations remain below the US Federal Reserve's target. During the recent semiannual testimony, Federal Reserve Chair Janet Yellen alluded to the possibility that the Fed may not increase interest rates in the near-term, and may delay a rate increase if their inflation and employment targets were not met."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Globally, the main focus will be on how Chinese and European economies react to further accommodative efforts from their central banks. Global growth signals may improve as more active fiscal policy out of China may boost its manufacturing sector. In Europe, further easing measures confirmed the ECB's commitment to minimizing disinflation fears. In the medium- to long-term, economic recovery, primarily in Asia and Europe, may be supportive of global commodity demand growth. However, diverging paths of economic revival may prolong a broad global recovery. As a result, idiosyncratic fundamental factors of individual commodities may continue to drive returns in the near-term."

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for over 20 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 February 28, 2015, the Team managed approximately USD 10.1 billion in assets globally.

Credit Suisse AG
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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 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.

Certain information contained in this document constitutes "Forward-Looking Statements" (including observations about markets and industry and regulatory trends as of the original date of this document), which can be identified by the use of forward-looking terminology such as "may", "will", "should", "expect", "anticipate", "target", "project", "estimate", "intend", "continue" or "believe", or the negatives thereof or other variations thereon or comparable terminology. Due to various risks and uncertainties beyond our control, actual events, results or performance may differ materially from those reflected or contemplated in such forward-looking statements. Readers are cautioned not to place undue reliance on such statements. Credit Suisse has no obligation to update any of the forward-looking statements in this document.

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