Commodity Market Decreased in May Amid Mixed Signals from the Global Economy

 Commodity Market Decreased in May Amid Mixed Signals from the Global Economy

PR Newswire

NEW YORK, June 12, 2013

NEW YORK, June 12, 2013 /PRNewswire/ --Commodities were lower in May as
uncertainty surrounding the future of the global economic recovery remained
high.

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Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management
business, said, "Over the second half of the month financial markets became
increasingly nervous over the possibility that the Federal Reserve will begin
to taper its program of asset purchases in coming months. This sent the
ten-year yield sharply higher and started to increase risk aversion. The
heightened concerns were due to numerous mentions of scaling back the pace of
quantitative easing by various members of the Federal Reserve Board. Also, US
economic data began to come in better than expected. Markets are currently
caught between good economic news being positive as it can indicate the
recovery is gaining traction, or good economic news being negative in the
short term as it may mean monetary policy will tighten. However, the bias of
most major central banks, especially in the US and Japan, seems to be toward
being overly easy, rather than risk tightening too early."

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total
Commodity Return Strategy, added, "As a result of these mixed signals,
uncertainty surrounding the future of the global economic recovery remains
high. With global growth remaining below average in the first quarter, and
recent data suggesting continued weakness this quarter, commodities continue
to face headwinds. However, some key indicators suggest stronger growth
further out, which would ultimately support economically sensitive
commodities. With the market currently not expecting higher inflation and
central banks not overly concerned by it either, commodities may benefit
should growth materialize at higher levels than expected." 

The Dow Jones-UBS Commodity Index Total Return decreased 2.24% in May.
Overall, 15 out of 22 index constituents posted negative returns. Precious
Metals was the worst performing sector, down 6.09%, as the dollar strengthened
and interest rates rose sharply. Holdings in gold exchange-traded funds
continued to fall, reaching their lowest levels in four years. Energy
declined 4.71%, led by Natural Gas. Crude oil and petroleum products also
decreased as a weak economic outlook continued to weigh on demand
expectations, while the current supply and demand balance is not overly tight.
The US Department of Energy conditionally approved a permit allowing a US
company to export liquefied natural gas to countries without existing free
trade agreements with the US, providing a potential boost for longer term
demand. Livestock was relatively unchanged, down 0.33%, as Lean Hogs
increased while Live Cattle decreased. Exports were reported weaker for the
first quarter of 2013, partially due to import restrictions in China and
Russia. China's largest publicly-traded meat processor announced its bid for
the largest pork producer in the US, Smithfield Foods. This may boost US pork
exports to China. Agriculture was also relatively unchanged, up 0.04%. Corn
was supported by Chinese buying and strong demand from US ethanol
manufacturers. Coffee declined on the back of expectations of a record "off
year" crop out of Brazil, which accounts for about one-third of the world's
coffee supply and existing comfortable inventory levels. Industrial Metals
gained 1.61% as declining zinc and aluminum stocks in London Metals Exchange
warehouses supported the sector, in addition to gains in copper. The better
than expected US employment report at the beginning of the month along with
strong consumer confidence readings provided a boost to the economically
sensitive sector at the beginning of the month.

About the Credit Suisse Total Commodity Return Strategy
Credit Suisse's Total Commodity Return Strategy has been managed for 18 years
and seeks to outperform the return of a commodities index, such as the Dow
Jones–UBS 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:

  oSpot Return: price return on specified commodity futures contracts;
  oRoll Yield: impact due to migration of futures positions from near to far
    contracts; and
  oCollateral Yield: return earned on collateral for the futures.

As of May 31^st, 2013 the team managed approximately USD 10.8 billion in
assets globally.

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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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