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Commodities Declined on Weakening Demand Expectations

Commodities declined in September on weakening demand expectations for metals and agricultural commodities, according to Credit Suisse Asset Management.

New York – WEBWIRE

The Bloomberg Commodity Index Total Return performance was negative for the month, with 12 out of 22 Index constituents posting losses.

Credit Suisse Asset Management observed the following:

  •  Industrial Metals fell 3.75% on prospects of lower Chinese demand and due to a stronger US Dollar, making base metals more expensive to Chinese buyers.
  •  Precious Metals decreased 3.34% due to a strengthening US Dollar and reduced save haven demand as tensions between the US and North Korea slightly eased.
  •  Agriculture was flat for the month. Soybean Oil led the sector lower amid lower demand expectations after the US EPA suggested it may decrease the Renewable Fuel Standard biodiesel mandate.
  •  Energy increased 3.51% as crude oil and petroleum products generally increased as US transportation and refining infrastructure largely recovered following the impacts of hurricanes.
  •  Livestock gained 3.57%, led up by Live Cattle, as domestic and export demand for beef remained elevated in September. Lean Hogs also rose due to continued strong export demand.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “Hurricane Harvey severely impacted refining operations and the transportation of crude and refined products in the US Gulf Coast region, home to a significant portion of the United States’ energy infrastructure. Cotton crops in the US Southeast were also slightly affected by these extreme weather events. While conditions have not fully normalized as of the beginning of October, at this point, it appears there will not be lasting material supply shocks to energy or agricultural commodities from the storms, though they certainly impacted prices in September. Meanwhile, inventories of crude oil and petroleum products have now largely normalized around the world, with one notable exception being US crude inventories. With parties to the OPEC member agreement continuing to restrict production, the US should be increasingly called upon as the world’s swing producer and exporter. US exports for September continued to be strong.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “From a macroeconomic standpoint, positive US economic indicators, such as increased median household incomes and upward revisions to second quarter GDP, helped spur the Fed to continue with more hawkish signaling of another rate hike before year end. However, uncertainty increased surrounding who will be appointed the next Fed Chair, which in turn raised uncertainty regarding the future path of monetary policy. In the Eurozone, consumer sentiment indicators and second quarter GDP rose as well. The ECB signaled it will begin talks to potentially reduce monetary stimulus towards the end of 2017. However, there is still concern surrounding the future for the Euro bloc, with unrest in Catalonia, including a disputed October independence referendum, potentially holding ramifications for Spain and the region in general. In China, CPI grew while PMI remained in expansionary territory. The economic status of these major indicators all point to potentially sustainable higher inflation.”

About the Credit Suisse Total Commodity Return Strategy

Credit Suisse’s Total Commodity Return Strategy is managed by a team with over 30 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, 2017, the Team managed approximately USD 8.4 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 offers clients its combined expertise in the areas of private banking, investment banking and asset management. Credit Suisse provides advisory services, comprehensive solutions and innovative products to companies, institutional clients and high-net-worth private clients globally, as well as to retail clients in Switzerland. Credit Suisse is headquartered in Zurich and operates in over 50 countries worldwide. The group employs approximately 46,230 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

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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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