NEW YORK, Nov. 9, 2016 /PRNewswire/ -- Commodities
declined slightly in October as a result of shifting fundamental
factors, according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was
slightly negative for the month, with 10 out of 22 Index
constituents posting losses.
Credit Suisse Asset Management observed the following:
- Precious Metals declined the most, down 4.51%, led lower by
Silver, as the likelihood that the US Federal Reserve would raise
rates in December increased following positive economic data early
in the month.
- Energy ended the month 2.73% lower, led by Brent Crude Oil, as
a lack of an official OPEC agreement to cut production and signs of
increased US production removed some premium built into the market
following the initial Algiers
announcement.
- Industrial Metals increased 1.31%, led by Aluminum, due to
sharply higher coal costs in China
which elevated production costs directly and indirectly.
- Agriculture ended the month 3.11% higher, led by Coffee, as it
finished the 2015/2016 crop year in a supply deficit for the second
year in a row, as reported by the International Coffee
Organization.
- Livestock was the best performing sector, up 5.35%, as Lean
Hogs gained following the latest report from the US Department of
Agriculture (USDA) which showed a lower amount of frozen pork in
storage than the same period last year.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "Views
regarding various commodities shifted throughout October. Crude oil
and petroleum products started the month strong after OPEC's
tentative agreement, but lost steam after new headlines
highlighting obstacles to a production cut deal. The main challenge
seems to be Saudi and Iraqi disagreement over an acceptable cap to
Iraqi production. Libya,
Nigeria, and Iran would be exempt from any production
quotas. Russia expressed support
for a deal, but has not offered any concessions as of yet. Despite
the bearish headlines, the fact that OPEC members were having this
level of dialogue was constructive and the potential for an
agreement remains. OPEC continues to be highly motivated to
increase prices and Saudi Arabia
is particularly motivated to maintain credibility."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "Regarding the macroeconomic environment,
consensus for 2017/2018 headline US inflation remains above the US
Federal Reserve's 2% target, while global inflation expectations
remain weak. The Fed has signaled that it is comfortable allowing
inflation to overshoot expectations to support improvements in
employment, and is expected to raise rates in December. Despite
uncertainty surrounding the upcoming US election, the market is
currently uncertain if there will be more than one interest rate
increase from December 2016 through
December 2017. In the current market
environment, commodities are expected to be a valuable
diversification tool as the asset class has historically delivered
a high correlation to unexpected inflation."
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 October 31, 2016, the Team
managed approximately USD 8.9 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
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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