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Commodity Market Stable Amid Continued Macroeconomic Uncertainty in November
Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “Market attention remained on US fiscal negotiations at the end of November. While a deal had yet to be made to avert the Fiscal Cliff, it was clear negotiations between the Republican-controlled House of Representatives and the President’s office were active. What a final deal will look like and when it will be passed is still highly uncertain. Also, Eurozone leaders agreed to release the next tranche of aid to Greece in December, cooling imminent Greek concerns. However, worries over the outlook for Europe in general remain heightened and will likely to continue to feature in the headlines and market activity in the future. Meanwhile, there were continued signs of economic recovery reported during the month of November out of China and the US.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “There are clearly signs of economic recovery while much uncertainty and potential headwinds remain. As a result, major central banks have generally continued to pursue their exceptionally loose monetary policies in an effort to provide ongoing support to nascent recoveries. Inflation may overshoot expectations if economic activity begins to pick up more robustly than expected or capital markets begin to react to negative real rates with capital outflows and currency depreciation. This scenario could be beneficial for those who use commodities as an inflation hedge.”
The Dow Jones-UBS Commodity Index Total Return was up by 0.05% in November. Overall, 12 out of 20 index constituents posted positive returns. Industrial Metals was the best performing sector, up 6.99% for the month. China’s manufacturing Purchasing Managers Index (“PMI”) readings continued to suggest recovery and expansion, reversing the summer decline. Base metals were also supported by US October housing starts, reported at their highest level since 2008, being above expectations. Livestock increased 1.48%, led by Lean Hogs, as a result of unexpected gains in pork cutout prices during a time of typically sluggish demand. Hog futures tend to dip at the beginning of November on weakening seasonal demand, as consumers turn to turkey and other meat proteins near the holidays. Precious Metals was relatively unchanged, up 0.25%, as ongoing concerns over Greece and Europe, along with the Fiscal Cliff debate, contributed to heightened volatility in currencies and precious metals. Energy decreased 1.14%, led lower by Natural Gas. However, crude oil and petroleum products increased after a volatile month with market sentiment closely following the Gaza conflict and the subsequent ceasefire. Expectations that Greece would be able to avoid near-term bankruptcy brightened the outlook for oil demand from Europe. Agriculture decreased 2.81%. Soybeans remained under pressure following the release of the November USDA monthly World Agriculture Supply and Demand report. Grains were generally weaker amid increased expectations for global supply.
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 November 30, 2012 the team managed approximately USD 10.8 billion in assets globally.