Commodity Market Decreased in June Amid Continued Slowing Growth Signals from China

NEW YORK, July 8, 2013 /PRNewswire/ -- Commodities were lower in June as uncertainty surrounding the future of the global economic recovery remained high.

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Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management business, said, "Macroeconomic news out of China weighed on commodities in June.  With China now shifting to a more moderate rate of growth and modestly improving conditions elsewhere, it is likely that supply divergences are playing an increasing role at a time when the higher correlation observed between other asset classes and commodities since 2008 has begun to normalize.  This may signal a return to a more fundamentally-driven market.  Within the current trend, the pace of supply growth is likely to remain the key factor in driving commodity returns."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Markets continue to be caught between good economic news being positive, indicating that the recovery is gaining traction, or good economic news being negative as it may mean monetary policy will tighten.  While the pace of these programs may eventually soften, we believe that most major central banks will continue to err on the side of providing more stimulus until the economy improves rather than risk tightening too much.  In the meantime, while inflation continues to be muted, the risk of unexpected inflation remains elevated." 

The Dow Jones-UBS Commodity Index Total Return decreased 4.71% in June.  Overall, 15 out of 22 index constituents posted negative returns.  Precious Metals was the worst performing sector, down 12.27%, on persistent worries over the US Federal Reserve's plan to wind down its monetary stimulus program and the rally of the US dollar in the second half of the month.  Industrial Metals declined 7.11% as a preliminary survey showed that China's factory activity weakened to a nine-month low in June as demand faltered.  This may heighten risks that a second quarter slowdown could be sharper than expected and increase pressure on the Chinese central bank to loosen policy.  Agriculture ended the month lower, down 4.16%, pressured by higher-than-expected ending corn stocks and further data showing larger-than-expected US acreages planted despite the earlier weather related planting delays.  News that Australia's new-crop wheat production increased 15% from a year ago added to concerns over larger global supplies.  Australia is one of the world's largest wheat exporters.  Energy decreased 2.55%, led by Natural Gas, following the higher-than-consensus storage injections in June as reported by the US Energy Information Administration.  Livestock was the best performing sector, up 3.10%, with both Live Cattle and Lean Hogs ending the month higher.  The USDA lowered its forecast for 2013 pork production and reported lower feeder cattle placements for May than a year ago. 

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for 18 years and seeks to outperform the return of a commodities index, such as the Dow Jones–UBS 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 30th, 2013 the team managed approximately USD 10.3 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 is able to offer clients its expertise in the areas of private banking, investment banking and asset management from a single source. Credit Suisse provides specialist advisory services, comprehensive solutions and innovative products to companies, institutional clients and high net worth private clients worldwide, and also to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,900 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.

Asset Management
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.

All businesses of Credit Suisse are subject to distinct regulatory requirements; certain products and services may not be available in all jurisdictions or to all client types.

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.

Copyright © 2013, CREDIT SUISSE GROUP AG and/or its affiliates.  All rights reserved.

 

SOURCE Credit Suisse AG



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