August 9, 2018 - 9:30 AM EDT
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Commodities Declined on Growing Supplies and Lower Demand Expectations

NEW YORK, Aug. 9, 2018 /PRNewswire/ -- Commodities declined in July due to increased potential for rising production in energy commodities and lower demand expectations for base metals.

Credit Suisse logo. (PRNewsFoto/Credit Suisse)

The Bloomberg Commodity Index Total Return performance was lower for the month, with 15 out of 22 Index constituents posting losses.

Credit Suisse Asset Management observed the following:

  • Industrial Metals declined 4.69%, with all constituents posting losses, as growing trade conflict between the US and China weighed on demand expectations.
  • Energy fell 4.36%, led lower by crude oil and petroleum products, as Saudi Arabia and other OPEC members increased production while Russia and Libya reported intentions to bring production back online.
  • Livestock was 4.34% lower, led down by Lean Hogs, following increased production estimates and reduced exports of US pork products.
  • Precious Metals decreased 2.69% as the US Dollar rose after the US Fed announced its intention to continue raising short-term interest rates gradually despite the growing trade conflict posing a threat to economic growth.
  • Agriculture increased 2.70%, led higher by Wheat, after the latest USDA WASDE report showed larger-than-expected reductions in wheat production and exports from both the European Union and Russia for the 2018/2019 crop year.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "The geopolitical environment has become immersed in trade disputes. Increased barriers have forced buyers and producers to trade commodities with new partners at greater costs due to more expensive transportation or the introduction of intermediaries within the supply chain. These factors have already been inflationary to some commodities. The effects of the tariffs have so far been mixed. The US economy continued to show strength growing at an annual rate of 4.1% during the second quarter. This expansion has strengthened the US administration's resolve to push forward with additional tariffs. On the other hand, countries subject to US tariffs have shown some signs of weakness. Mexico's second quarter GDP actually shrank slightly on a seasonally adjusted basis from the first quarter, while China's July manufacturing activity came in lower than expected."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: "This increases the challenges posed to governments and their central banks as policymakers look to remove loose monetary policy but are keen to not stall economic growth as trade issues escalate. This may mean an even slower course of action than initially expected by central banks or increasing supportive fiscal measures. While the US Fed looks to be much more aggressive than other major central banks, gradual monetary tightening has been complemented with fiscal stimulus. In July, China announced a series of tax cuts, new business loans and increased infrastructure spending measures with the objective of countering the slowdown in its economy. The US and China are also both attempting to mitigate the impacts from the increased tariffs through aid packages and tariff rebates. In the meantime, Eurozone officials have begun discussions with the US in an attempt to resolve trade issues and improve relations. In the long run, if tariffs remain in place, this may be inflationary for the end users of many commodities involved. If a common ground can be found and the risks from tariffs are reduced, then the global economy may continue on its trajectory of synchronized growth first witnessed in 2017."

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy is managed by a team with over 32 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 July 31, 2018, the Team managed approximately USD 9.5 billion in assets globally.

Press Contact
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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'). Our strategy builds on Credit Suisse's core strengths: its position as a leading wealth manager, its specialist investment banking capabilities and its strong presence in our home market of Switzerland. We seek to follow a balanced approach to wealth management, aiming to capitalize on both the large pool of wealth within mature markets as well as the significant growth in wealth in Asia Pacific and other emerging markets, while also serving key developed markets with an emphasis on Switzerland. Credit Suisse employs approximately 45'430 people. The registered shares (CSGN) of Credit Suisse AG'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.

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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. 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 necessarily a guide to the future. 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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SOURCE Credit Suisse AG


Source: PR Newswire (August 9, 2018 - 9:30 AM EDT)

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