Commodity Market Increased Slightly in June as Supply Risks Rebounded

NEW YORK, July 9, 2014 /PRNewswire/ -- Commodities were slightly higher in June, supported by idiosyncratic supply risks.

Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management business, said, "Commodities continued the broader trend of the year in  June, and were generally supported by one-off event driven risks which negatively affected supplies. Agriculture was the one exception as supply expectations generally increased during the month.  We expect idiosyncratic risks to continue to drive commodity returns going forward.  For example, crude oil may continue to stay well-supported as geopolitical risks seem skewed to the upside, with the uncertainty in Iraq the most likely to dominate in the near term.  Elsewhere, geopolitical risks remain heightened in various parts of the Middle East along with Ukraine and Russia.  This has helped increase crude oil prices across the curve, while the forward curve remains steeply backwardated."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Global Industrial Production momentum may rebound over the next half of the year as China and Europe's economies respond to easing measures.  As global growth improves, demand for physical commodities should also increase.  However, emerging market growth momentum may continue to lag that of developed markets and a broad-based, synchronized global recovery may not be imminent.  As such, we believe idiosyncratic fundamentals of individual commodities will continue to influence returns, and correlations between commodities and traditional classes will continue to breakdown.  This, along with the elevated potential of inflation overshooting expectations, should support the diversification benefits of commodities going forward."

The Bloomberg Commodity Index Total Return gained 0.60% in June.  Overall, 12 out of 22 index constituents posted positive returns.  Precious Metals was the best performing sector, up 7.70%.  Fears surrounding the sectarian violence in Iraq and uncertainty regarding the role the West would play going forward supported the safe-haven appeal of gold and silver, as did continued dovish communications from the Federal Reserve.  The Livestock sector gained 7.41%.  In addition to Live Cattle, Lean Hogs gained as a result of reduced slaughter rates and continued impacts from a pig virus.  Industrial Metals increased 2.57%, led by Zinc.  Copper was the second best performer as inventories on the London and Shanghai exchanges continued to decline.  Energy ended the month 2.02% higher.  Sectarian violence in Iraq supported crude oil and petroleum product returns. A Sunni militant group seized a number of large northern cities and moved toward the Shia-dominated southern part of Iraq.  Although oil exports have not yet been disrupted, the potential for extended unrest led to increased risk premiums.  Agriculture declined 6.27%, with key grain components trading lower. 

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse's Total Commodity Return Strategy has been managed for over 19 years 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, 2014, the Team managed approximately USD 11.7 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 46,000 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 © 2014, CREDIT SUISSE GROUP AG and/or its affiliates.  All rights reserved.

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SOURCE Credit Suisse AG



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