May Sees Consolidation in Commodity Markets

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Jun 09, 2015, 09:00 ET

NEW YORK, June 9, 2015 /PRNewswire/ -- Commodities were lower in May, driven by supply fundamentals and macroeconomic factors, 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 trading lower.

Credit Suisse Asset Management observed the following:

Industrial Metals was the worst performing sector, down 7.70%, as a continued weak economic growth outlook for China weighed on demand expectations.
Agriculture declined 3.50%, led lower by softs, as a weaker Brazilian Real incentivized exports of sugar, coffee and soybeans. In addition, heavy rainfall improved the coffee harvest outlook in Brazil and Colombia, increasing supply expectations.
Energy finished the month 2.13% lower, led by Natural Gas. Inventories rose more than expected towards the end of the month, and forecasts for moderate weather across the U.S. decreased cooling demand expectations.
Livestock gained the most, up 2.34%. In addition to Lean Hogs, Live Cattle also ended the month higher following increased wholesale beef demand. Furthermore, good pasture conditions incentivized producers to hold back cattle, shrinking near term supplies.
Precious Metals increased 1.29%, buoyed by heightened geopolitical risk and uncertainty over the Greek debt crisis, supporting demand for silver and gold.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "Mixed economic data continues to undermine the sustainability of a pronounced global economic recovery. However, recent market and economic indicators may hint that global industrial production momentum, especially in both the Eurozone and the U.S., has troughed and is set to accelerate. In the U.S., much of the economic data reported in May, for the first quarter as well as for April, was weaker than expected. First quarter GDP was revised lower and indicated contraction, though weakness may have been due to the extremely cold late winter weather, the West Coast port shutdown and the sharply stronger U.S. dollar. However, a number of key indicators remained healthy. Unemployment continued to decrease to near full employment, and new home sales bounced back in April to near the highest levels since 2008."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "The U.S. Federal Reserve appears to be growing closer to tightening interest rates, with U.S. core inflation running near its target, along with broad measures of unemployment. European and Japanese central banks continue to utilize policies designed to stimulate, while China's policy remains more ambiguous, but seems willing to ease as necessary. An increase in global inflation is increasingly likely amid such a backdrop. Volatility across multiple asset classes also seems set to continue. As such, we believe investors may derive long-term diversification benefits in conjunction with potential inflation protection through a strategic allocation to commodities."

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for over 28 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 May 31, 2015, the Team managed approximately USD 11.1 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.

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