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Macroeconomic Uncertainty Weighed on Commodity Market in October

2012-11-13 08:51 ET - News Release

NEW YORK, Nov. 13, 2012 /PRNewswire/ -- Commodities declined in October as continued macroeconomic uncertainty weighed on markets generally.

(Logo: http://photos.prnewswire.com/prnh/20091204/CSLOGO)

Nelson Louie, Global Head of Commodities in Credit Suisse's Asset Management division, said, "Hurricane Sandy, despite the extreme damage and tragic loss of life, has passed with relatively little impact on commodity markets.  Ongoing macroeconomic uncertainty continues to be the biggest factor weighing on the commodity markets.  At the end of October, politics remained very much in focus in two of the world's most important economies: the United States and China.  Uncertainty remains on what policies will be followed and how they will impact the economy and markets.  Both governments will oversee economies in transition, trying to deal with structural challenges while maintaining burgeoning economic recoveries.  Neither political event will solve any long term structural issues automatically, though increased certainty may be supportive." 

Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, "Continued quantitative easing in the US, and accommodative monetary policy seen across most key markets, should continue to support the appeal of hard assets as an inflation hedge.  Signs of improved economic growth in the US and elsewhere have not yet dampened central bank enthusiasm for trying to stimulate economic growth, nor caused inflation expectations to increase.  Inflation expectations remain anchored at near historic levels, with markets continuing to focus on weak economic conditions and safety of capital, rather than on protection against the eventual impact of prolonged, exceptionally loose monetary policy on inflation.  We believe investors will continue to benefit from the long-term diversification benefits that commodities provide."

The Dow Jones-UBS Commodity Index Total Return was down by 3.87% in October.  Overall, 17 out of 20 index constituents posted negative returns.  Livestock was the best performing sector, with both Live Cattle and Lean Hogs trading higher.  Energy decreased 2.27% for the month. Crude oil and petroleum products declined despite tensions between Turkey and Syria and lower output at North Sea oilfields.  Hurricane Sandy shut East Coast refineries, roads and airports, reducing crude oil and fuel demand expectations.  Natural Gas was the best performing constituent within the sector, as excess storage levels continued to moderate.  Agriculture decreased 3.33%, with Coffee the worst performer. Sugar also declined following reports of buyers in India and China paying to cancel orders due to existing oversupply. Seasonal harvest progress in the US and better prospects for Brazilian supply also weighed on Soybeans and Soybean Oil.  Precious Metals fell 3.90%. The latest Hong Kong demand data, released for August, was weaker than the previous month and weaker than expected.  This added to worries that Chinese demand may ease.  Industrial Metals was the worst performing sector, falling 9.27%.  Risk appetite weakened amid worsening macro-economic sentiment.  The lack of concrete resolution in Europe and the World Bank's downgrade of its economic growth forecast for China were contributing factors.  Chinese manufacturing data did offer some encouraging signs that activity may be beginning to accelerate.

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:

  • 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 October 31, 2012 the team managed approximately USD 10.7 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 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 48,400 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 © 2012, CREDIT SUISSE GROUP AG and/or its affiliates.  All rights reserved.


SOURCE Credit Suisse AG

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