October Sees Further Consolidation in Commodity Markets

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Nov 12, 2014, 09:59 ET

NEW YORK, Nov. 12, 2014 /PRNewswire/ -- October was a mixed period for commodities as fundamental factors continued to predominantly drive returns, according to Credit Suisse Asset Management.

The Bloomberg Commodity Index Total Return performance was negative for the month, with 11 out of 22 Index constituents trading lower.

Credit Suisse Asset Management observed the following:

Energy was the worst performing sector, down 9.10%, with all components posting negative returns. Excess inventories weighed on petroleum prices, while forecasts of continued mild weather drove Natural Gas lower.
Precious Metals decreased 3.84%. The statement released following the Federal Open Market Committee meeting in October confirmed an end to quantitative easing, citing an improvement in the US labor market. This helped to strengthen the US Dollar and led Gold and Silver lower.
Livestock declined 1.34%, led by Lean Hogs. Supplies increased during the month as the size and number of available hogs recovered, leading to decreases in wholesale prices.
Agriculture was the best performing sector, up 8.91%, led higher by grains as delayed soybean and corn harvesting in the US and delayed soybean plantings in Brazil decreased supply expectations.
Industrial Metals closed the month 1.47% higher. Reports of declining London Metal Exchange inventories amid weaker domestic supply growth in China supported returns in Aluminum.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management said: "October was a mixed period for commodities as fundamental factors continued to mainly drive returns, while macroeconomic forces remained relevant. The Energy sector was driven lower by excess oil inventories and demand concerns due to global growth worries. Alternatively, weather-related risks delayed harvest domestically and production in South America, which drove grain prices higher. The difference in perceived paths of the world's major central banks continued to support the US Dollar. This acted as a headwind for commodities as of late."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "In the US, significant labor market improvements supported the end of the Federal Reserve's asset purchase program in October. Despite the positive outlook for the US economy, the Fed confirmed its commitment to maximum employment and its 2% inflation target. Interest rate increases will likely be delayed if progress towards these mandates occurs slower than expected. The growth picture in the US appears to look fairly robust. Meanwhile, many central banks around the world appear willing to exert efforts to support a global economic recovery, explicitly seeking to create higher inflation."

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 October 31, 2014, the Team managed approximately USD 10.8 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.

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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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SOURCE Credit Suisse AG