NEW YORK, June 9, 2016 /PRNewswire/ -- Commodities slightly decreased in May, driven by supply factors and macroeconomic events, according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was slightly negative for the month, with 11 out of 22 Index constituents posting losses.
Credit Suisse Asset Management observed the following:
- Industrial Metals was the worst performing sector, down 7.27%, with all sector commodities yielding negative returns, as demand concerns out of China persisted. Supplies also remained ample, broadly weighing on base metals.
- Precious Metals declined 7.07%, led lower by Silver, amid a strengthening U.S. Dollar and Chinese industrial demand concerns. Strong U.S. economic data reinforced expectations that the Federal Reserve is more likely to raise interest rates this summer, reducing precious metals demand.
- Livestock increased 2.42%, led by Live Cattle, due to improved demand expectations as the U.S. Department of Agriculture raised U.S. beef export projections. Recent higher prices for soybeans may decrease beef production expectations.
- Energy ended 3.08% higher, led by Heating Oil. The U.S. Energy Information Administration reported larger-than-expected inventory draws amid strong demand. WTI Crude Oil also gained amid production disruptions in Nigeria and Canada and a decline in U.S. crude oil output.
- Agriculture was the best performing sector, up 3.43%, led by Soybean Meal. The USDA raised its 2015/2016 forecast for soybean meal exports, with importers looking to the U.S. for supplies amid lower production expectations for South America.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "Multiple events across commodity components altered the supply outlook during the month. Weather played a key role in South American production of Corn, Soybeans and Sugar. As El Niño abates, a potential La Niña event may tighten U.S. agricultural supplies. Supply disruptions tightened crude oil and petroleum markets, and U.S. production declined as E&P companies adapted to lower prices. With OPEC spare capacity at low levels, their ability to respond to supply shocks may be challenging. This may leave U.S. shale producers as the new swing producers, although they may need higher prices to incentivize significant capital expenditure increases. Meanwhile, global crude oil consumption remains robust with the overall demand outlook recently revised higher by the IEA."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Macroeconomic risks associated with global central bank policy also impacted commodity returns. Timing of an interest rate rise in the U.S. may be delayed amid recent weak employment data, as well as potential risks abroad, such as the upcoming "Brexit" referendum and Chinese equity market volatility. Despite the fluctuating central bank policy differences between the U.S. and the rest of the world, overall, global monetary policy remains extraordinarily loose as the ultimate goal is to drive up both growth and inflation."
About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a team with over 28 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 May 31, 2016, the Team managed approximately USD 8.1 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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