NEW YORK, July 11, 2018 /PRNewswire/ -- Commodities fell in
June as the production of agricultural commodities increased, while
rising trade tensions among major economies threatened demand.
The Bloomberg Commodity Index Total Return performance was lower
for the month, with 16 out of 22 Index constituents posting
losses.
Credit Suisse Asset Management observed the following:
- Agriculture declined 10.48%, led lower by Soybeans, as the
ongoing trade conflict between the US and China continued to hurt the competitiveness of
US products. The US Department of Agriculture also reported higher
soybean production out of Brazil.
- Industrial Metals fell 4.76%, led down by Zinc, after the
International Lead and Zinc Study Group showed global production
outpacing consumption during the first four months of the
year.
- Precious Metals dropped 3.29%. The US Federal Reserve (Fed)
raised the Federal Funds Rate, while signaling it may hike at least
one more time in 2018, decreasing the appeal of Gold and Silver as
alternative stores of value.
- Energy increased 2.70% for the month, led up by WTI Crude Oil,
as increased US exports, doubts surrounding US producers' ability
to continue to grow production, and a power outage at a large
Canadian producer pushed prices higher.
- Livestock was 2.74% higher for the period. Live Cattle gained
due to robust seasonal meat packer demand amid higher meat packer
margins as demand for beef was strong.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "Trade
tensions between the US and its major trading partners increased in
June. In retaliation to US tariffs on $50
billion of Chinese goods, China announced reciprocal duties on American
products, including several key agricultural commodities. In
response, the US administration threatened tariffs on an additional
$200 billion of Chinese exports,
further escalating trade tensions. The European Union, Mexico, and Canada also released new counter measures to
the US tariffs, seeking to protect their domestic industries.
These duties may hamper economic growth. In June, the
industrial production readings for the US and Eurozone came in
below expectations. This may be concerning for the Eurozone as its
industrial production readings have trended downward from the
strong pace of growth witnessed in late 2017. Further tariffs
between the US and other major economies may disrupt the global
supply chain and lead to higher inflation expectations, while
businesses may delay spending plans due to uncertainty regarding
the cost and availability of inputs for finished goods."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "The Fed's preferred benchmark for measuring
inflation, the core Personal Consumption Expenditures price index,
reached the central bank's 2.0% target for the first time in six
years. Even though the Fed has now set expectations for at least
one additional rate hike in 2018, the Fed may let inflation run
slightly above its historical 2% goal, following a prolonged period
of low inflation, in order to potentially avoid large, unexpected
movements away from its target in either direction. In the
Eurozone, the annual rate of inflation rose above the European
Central Bank's (ECB) targeted level for the first time in over a
year. This positive reading came after the ECB revealed plans to
close out its bond buying program by December 2018, while keeping a negative deposit
rate in place into the summer of 2019. Assuming the trade war
continues to escalate, central banks may be forced to choose
between employing more dovish policies in an attempt to support
economic growth or take a hawkish approach to stave off rising
inflation. In either scenario, inflation may come in higher
relative to market expectations."
About the Credit Suisse Total Commodity Return
Strategy
Credit Suisse's Total Commodity Return Strategy is
managed by a team with over 32 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 June 30, 2018, the Team
managed approximately USD 9.6 billion
in assets globally.
Press Contact
Candice
Sun, Corporate Communications, +1 (212) 325-8226,
candice.sun@credit-suisse.com
Credit Suisse AG
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