NEW YORK, Aug. 9, 2018 /PRNewswire/ -- Commodities declined
in July due to increased potential for rising production in energy
commodities and lower demand expectations for base metals.
The Bloomberg Commodity Index Total Return performance was lower
for the month, with 15 out of 22 Index constituents posting
losses.
Credit Suisse Asset Management observed the following:
- Industrial Metals declined 4.69%, with all constituents posting
losses, as growing trade conflict between the US and China weighed on demand expectations.
- Energy fell 4.36%, led lower by crude oil and petroleum
products, as Saudi Arabia and
other OPEC members increased production while Russia and Libya reported intentions to bring production
back online.
- Livestock was 4.34% lower, led down by Lean Hogs, following
increased production estimates and reduced exports of US pork
products.
- Precious Metals decreased 2.69% as the US Dollar rose after the
US Fed announced its intention to continue raising short-term
interest rates gradually despite the growing trade conflict posing
a threat to economic growth.
- Agriculture increased 2.70%, led higher by Wheat, after the
latest USDA WASDE report showed larger-than-expected reductions in
wheat production and exports from both the European Union and
Russia for the 2018/2019 crop
year.
Nelson Louie, Global Head of
Commodities for Credit Suisse Asset Management, said: "The
geopolitical environment has become immersed in trade disputes.
Increased barriers have forced buyers and producers to trade
commodities with new partners at greater costs due to more
expensive transportation or the introduction of intermediaries
within the supply chain. These factors have already been
inflationary to some commodities. The effects of the tariffs have
so far been mixed. The US economy continued to show strength
growing at an annual rate of 4.1% during the second quarter. This
expansion has strengthened the US administration's resolve to push
forward with additional tariffs. On the other hand, countries
subject to US tariffs have shown some signs of weakness.
Mexico's second quarter GDP
actually shrank slightly on a seasonally adjusted basis from the
first quarter, while China's July
manufacturing activity came in lower than expected."
Christopher Burton, Senior
Portfolio Manager for the Credit Suisse Total Commodity Return
Strategy, added: "This increases the challenges posed to
governments and their central banks as policymakers look to remove
loose monetary policy but are keen to not stall economic growth as
trade issues escalate. This may mean an even slower course of
action than initially expected by central banks or increasing
supportive fiscal measures. While the US Fed looks to be much more
aggressive than other major central banks, gradual monetary
tightening has been complemented with fiscal stimulus. In July,
China announced a series of tax
cuts, new business loans and increased infrastructure spending
measures with the objective of countering the slowdown in its
economy. The US and China are also
both attempting to mitigate the impacts from the increased tariffs
through aid packages and tariff rebates. In the meantime, Eurozone
officials have begun discussions with the US in an attempt to
resolve trade issues and improve relations. In the long run, if
tariffs remain in place, this may be inflationary for the end users
of many commodities involved. If a common ground can be found and
the risks from tariffs are reduced, then the global economy may
continue on its trajectory of synchronized growth first witnessed
in 2017."
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 July 31, 2018, the Team
managed approximately USD 9.5 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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Certain risks relating to investing in Commodities and
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Investment in commodity markets may not be suitable for all
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