Credit Suisse Asset Management observed the following:
- Energy was the worst performing sector, down 10.69%, with all sector commodities posting losses. WTI Crude Oil declined the most amid increased US production expectations. Brent Crude Oil also decreased as global excess supplies persisted.
- Livestock declined 9.25%, led lower by Lean Hogs, after the US Department of Agriculture revised their estimated 2016 pork production higher.
- Agriculture ended 7.42% lower. Soybean Meal declined the most due to an improved production outlook. Losses were partially offset by gains in Cotton, which increased due to tighter supply projections and increased crop concerns.
- Industrial Metals gained 3.17%, led by Nickel, amid strong Chinese demand and tightening supply conditions in the Philippines.
- Precious Metals was the best performing sector, up 4.29%. Silver increased the most due to weaker-than-expected US economic data and after the US Federal Reserve left interest rates unchanged. Economic uncertainty generated by the UK's decision to exit the EU also continued to fuel safe haven demand.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "Within Energy, previous supply shocks began to ease. As production outages come back online, it may take longer for demand to reduce excess global crude oil inventories. However, the threat to OPEC oil supplies is likely to persist as militant groups continue to target key oil infrastructure in Iraq and Libya, and other groups attack oil facilities in Nigeria. Domestically, increased US crude oil production pushed prices lower, which may encourage producers to tighten supplies and prevent capital expenditures from expanding too quickly. Producers may be slower to increase hedging and restart idled production with WTI Crude Oil in the USD 40 range, as compared to when it was priced in the USD 50 range."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: "Macroeconomic factors may also impact commodity returns. Along with the UK's vote to leave the EU, the Bank of England is expected to further expand stimulus measures by cutting interest rates. Meanwhile, in the US, the Fed indicated that near-term risks to the economy had subsided in their July statement. However, they left interest rates unchanged, with the market expecting a rate increase only once more this year, if at all. With other major global central banks indicating their bias towards further easing, it may be less likely that the Fed will rush to raise interest rates. Amid increased uncertainty and potential geopolitical turmoil abroad, commodities may serve as a valuable diversification tool and help to reduce overall portfolio risk."
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 July 31, 2016, the Team managed approximately USD 8.6 billion in assets globally.
Credit Suisse AG
Credit Suisse AG is one of the world's leading financial services providers and is part of the Credit Suisse group of companies (referred to here as 'Credit Suisse'). As an integrated bank, Credit Suisse offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 47,180 people. The registered shares (CSGN) of Credit Suisse's parent company, Credit Suisse Group AG, are listed in Switzerland and, in the form of American Depositary Shares (CS), in New York. Further information about Credit Suisse can be found at www.credit-suisse.com.
In its Asset Management business, Credit Suisse offers products across a broad spectrum of investment classes, including hedge funds, credit, index, real estate, commodities and private equity products, as well as multi-asset class solutions, which include equities and fixed income products. Credit Suisse's Asset Management business manages portfolios, mutual funds and other investment vehicles for a broad spectrum of clients ranging from governments, institutions and corporations to private individuals. With offices focused on asset management in 19 countries, Credit Suisse's Asset Management business is operated as a globally integrated network to deliver the bank's best investment ideas and capabilities to clients around the world.
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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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