Commodity Market Increased in August Amid Improved Macroeconomic Environment
and Increased Geopolitical Risk
NEW YORK, Sept. 12, 2013
NEW YORK, Sept. 12, 2013 /PRNewswire/ -- Commodities were higher in August as
China's growth outlook improved and the risk of the US Federal Reserve
tightening remained uncertain.
Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management
business, said, "Chinese growth may have stabilized over the period.
Commodities are likely to benefit from improving Chinese growth momentum, as
it may be supportive of increased demand. At the same time, mixed US economic
data and sharply declining emerging market currencies and securities have
clouded the already uncertain outlook regarding the possibility of a Federal
Reserve tightening in September. Regardless of whether the Federal Reserve
tapers or not in September, it seems unambiguous that the Federal Reserve is
going to err on the side of being overly easy with its policies. This may
increase the risk of inflation overshooting expectations, especially should
economic growth materialize stronger than is currently expected."
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total
Commodity Return Strategy, added, "In the near term, the increase in
geopolitical risk in the Middle East has also been substantial. This has the
capacity to lead to further oil supply disruptions, through further
destabilizing production and transportation of crude oil from nearby key
producers. Increased geopolitical risk has also been a key driver in the gold
rebound as investors move into safe havens. While a final decision on
military intervention in Syria has been delayed in the US, recent events
highlight the diversification benefits that commodities can add to a
The Dow Jones-UBS Commodity Index Total Return increased 3.40% in August.
Overall, 14 out of 22 index constituents posted positive returns. Precious
Metals increased the most, up 9.33%, with both Gold and Silver higher. Gold
increased after new home sales data were lower than forecasted, reducing
expectations that the US Federal Reserve will scale back its economic stimulus
program on the coattails of a strengthening economy. Energy gained 3.10%, led
by Brent Crude Oil, due to ongoing debate over military intervention in Syria
and reduced exports out of Iraq and Libya. Expectations remain elevated that
the US may coordinate an attack in response to the use of chemical weapons
against civilians in Syria. However, concerns eased slightly after Britain
announced it would not join in any military action. Livestock increased
2.59%, led by Lean Hogs, amid rising feed costs and ongoing concerns over
increased illnesses shrinking supply. A heat wave in many areas of the US
towards the end of the month also added to concerns that hog supplies could be
curbed. Agriculture ended the month higher, up 2.37%, with Soybeans and
soybean products positive, and the rest of the sector constituents negative.
Soybeans were more susceptible to yield damage due to the hot and dry weather
in the US Midwest due to the delayed planting progress earlier in the year.
Industrial Metals gained 1.74%, led by Copper, due to encouraging
macroeconomic data from China.
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
oCollateral Yield: return earned on collateral for the futures.
As of August 31^st, 2013 the team managed approximately USD 11.6 billion in
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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
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