NEW YORK, Oct. 15, 2015 /PRNewswire/ -- Commodities were lower in September, largely driven by fundamental factors, according to Credit Suisse Asset Management.
The Bloomberg Commodity Index Total Return performance was negative for the month, with 14 out of 22 Index constituents trading lower.
Credit Suisse Asset Management observed the following:
- Energy was the worst performing sector, down 9.88%, amid rising U.S. crude oil inventories for the month. In addition, demand concerns increased due to weaker global growth expectations.
- Livestock decreased 4.36%, led lower by Live Cattle, due to heavier reported cattle weights.
- Industrial Metals declined 1.35%, led lower by Zinc, as concerns of an economic slowdown in China continued to reduce Chinese base metals demand expectations. Preliminary Chinese Purchasing Managers' Index ("PMI") data indicated that manufacturing activity came in below already weak expectations.
- The Precious Metals sector ended the month 1.25% lower, with both Gold and Silver posting negative returns. Positive economic reports, including improved U.S. household spending and rising U.S. company payrolls, according to the latest ADP data, seemed to have strengthened the case for the U.S. Federal Reserve to raise interest rates this year, as of month end.
- Agriculture was the best performing sector, up 2.23%, led by Sugar. Forecasts for rainfall in Brazil's Center-South region raised concerns over harvest disruptions towards the end of the month. In addition to unfavorable weather, Brazil's state-run oil company increased gasoline prices, which may spur demand for cane-based ethanol.
Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "Although fundamental factors may have dominated individual commodity performance for the month, global macroeconomic data continued to be important. The U.S. Federal Reserve delayed an interest rate hike, citing concerns over global growth, low U.S. inflation and the need for further gains in employment. Towards the end of the month, higher consumer confidence and an upward revision to second quarter GDP growth may have strengthened the case for an interest rate rise later this year. Meanwhile, the Eurozone's inflation rate was forecasted to turn negative in September, pressuring the ECB to increase stimulus measures. Economic growth in Asia remained weak, as the Asian Development Bank reduced its growth forecasts for the region overall. The ongoing slowdown in Asia may lead to additional policy easing in China and other Asian economies."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "As of month end, significant uncertainty remained regarding timing for a U.S. rate rise. However, the U.S. Federal Reserve has proven that it is willing to maintain its easy monetary stance if inflation remains low. They have also indicated that, while they may raise rates in the near future, they will not hurry to tighten monetary policy too quickly. Continued monetary stimulus in the Eurozone and Asia, along with easy monetary policy in the U.S., may eventually contribute to a rise in 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 September 30, 2015, the Team managed approximately USD 9.3 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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