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Commodities Gained as the Risk of Supply Disruptions Increased

Commodities gained in April as the risk of supply disruptions increased amid rising geopolitical tensions.


New York – WEBWIRE

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

Credit Suisse Asset Management observed the following:

  • Energy increased 5.02%, led higher by Brent Crude Oil. Heightened expectations that the US would remove itself from the Iran sanctions deal increased the potential for limited Iranian exports in the near future.
  • Industrial Metals gained 3.52%. Aluminum rose the most after US sanctions against Rusal, one of the world’s largest aluminum producers, reduced supply expectations.
  • Agriculture was 1.44% higher. Kansas City Wheat and Chicago Wheat both increased after the USDA revealed worse-than-expected US wheat conditions due to dry and freezing conditions this past winter.
  • Livestock was up 0.42%, led higher by Live Cattle, after the USDA reported US feedlot placements in March declined 9% from the same time last year, indicating a slowdown in cattle herd expansion.
  • Precious Metals decreased 0.23% after North Korea signaled willingness to allow the US to inspect its nuclear test site, decreasing the geopolitical risk premium and the demand for Gold as a safe haven asset, as did a stronger US Dollar.

Nelson Louie, Global Head of Commodities for Credit Suisse Asset Management, said: “Over a month after the US first announced plans for tariffs, details remain unclear. The US has since postponed duties on some countries while applying quotas on steel and aluminum products for others. There remains uncertainty on how the long-term outcome may impact producers of the affected items. An outright trade war could be inflationary as supply shocks may reverberate into associated industries. This may result in delays in business decisions until there is more clarity. China has already proposed some retaliatory trade restrictions against the US’ agricultural markets for meats and grains. Should China shift its purchases from the US to elsewhere, those new suppliers may have to stop selling to other export markets, leaving potential additional demand sources for US producers.”

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added: “Signs of continued synchronized global growth and inflationary pressures remain apparent across major economies. Inflation readings within the US and the Eurozone for March both showed growth compared to a year ago. In particular, the US’ fiscal expansion may be stimulating for household and infrastructure spending, which may lift prices for goods more quickly. And while China’s CPI reading for March came in below expectations, the country’s first quarter growth came in higher-than-expected at 6.8%, partially due to strong exports. As markets anticipate inflation to continue its gradual yet upward rise this year, central banks may provide more hawkish guidance to prevent overheating economies. In the US, expectations were for two or more rate hikes for 2018, as of the end of April.”

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 April 30, 2018, the Team managed approximately USD 9.0 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 about 50 countries worldwide. The group employs approximately 46,370 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.

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. 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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