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Commodities Decreased in January as Fundamental Factors Continued to Drive Returns
PR Newswire

NEW YORK, Feb. 10, 2016 /PRNewswire/ -- Commodities decreased in January, largely driven by fundamental factors, according to Credit Suisse Asset Management.

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The Bloomberg Commodity Index Total Return performance was negative for the month, though with mixed performance among individual constituents. 11 out of 22 Index constituents yielded losses.

Credit Suisse Asset Management observed the following:

  • Energy was the worst performing sector, down 7.31%. Gasoline declined the most amid increasing inventories in the U.S. even as refineries, which had been operating well above normal levels, entered turnaround season. Crude oil and petroleum products continued their sharp decline due to excess global inventories, which were further exacerbated by the return of Iranian exports after sanctions were eased.
  • Industrial Metals declined 1.39%, led lower by Copper, due to decreased demand expectations after China's producer inflation data came in below expectations, and manufacturing data continued to indicate contraction.
  • Agriculture decreased slightly, down 0.81%. Sugar declined the most as forecasts for rain in Brazil's key producing regions improved the outlook for growing conditions toward the end of the month. Coffee was also lower on increased production estimates from Vietnam, Indonesia and Colombia.
  • Livestock gained 1.34% for the month, led by Lean Hogs as the U.S. Department of Agriculture reported increases in pork exports out of the U.S. throughout the month.
  • Precious Metals was the best performing sector, up 4.76%, Demand for safe haven assets increased amid volatility among financial markets, continued unease over China's economy and increased expectations for easier monetary policies from multiple major central banks.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: "The year got off to a volatile start, as continued growth concerns drove U.S. government bond yields and stocks sharply lower. Although these concerns also weighed on commodities, the asset class rallied during the second half of the month, largely driven by crude oil and petroleum products. While sanctions against Iran eased, allowing for oil exports, it may take time for Iranian production to ramp up significantly. Meanwhile, there were signs that the over-supply situation in oil may begin to reverse. Pressure on oil producers intensified as prices continued to decline, leading some companies to issue debt or equity, cut dividends and/or capital expenditures. Supply may need to be cut further if prices remain low." 

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Commodity returns may continue to be impacted by announcements from central banks if stagnant growth and market turmoil persist, undermining the effectiveness of their policies so far. In January, the European Central Bank hinted at further stimulus measures, while the Bank of Japan unexpectedly introduced negative interest rates. Within the U.S., a decline in consumer prices for December decreased future inflation expectations. The U.S. Federal Reserve remains likely to pursue an even slower course of monetary tightening. The market has already rapidly reduced its expectations for further interest rate increases throughout 2016. Continued loose monetary policy expectations for major central banks may lead to inflation risk, should economic growth exceed expectations." 

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 January 31, 2016, the Team managed approximately USD 7.7 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 © 2016, CREDIT SUISSE GROUP AG and/or its affiliates.  All rights reserved.

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