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Commodity Market Increased in January Amid Improved Macroeconomic Indicators
Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “Commodities increased in January, against the backdrop of a continued gradual improvement in global growth momentum, with the US data for the month of December suggesting that the fiscal cliff had little impact on spending. The Purchasing Managers Indices suggest that the fiscal cliff resolution has seen business begin to increase production in many regions. In addition to the positive data, risk appetite benefited from the decision by the US Congress to delay the debt ceiling negotiations, removing the most acute systemic risk that markets were expecting to face in the first quarter.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “Over the year ahead, the rate of global growth will likely once again be a key to commodity performance, as will continued low interest rates. As expected, the January Federal Open Market Committee statement contained minimal changes relative to the December meeting. Inflation may overshoot expectations, which remain near the Fed’s target of 2%, if economic activity begins to pick up more robustly than expected. Commodities have historically tended to outperform during periods of higher than expected inflation. We believe investors will continue to derive long-term diversification benefits that commodities provide.”
The Dow Jones-UBS Commodity Index Total Return was up by 2.40% in January. Overall, 18 out of 22 index constituents posted positive returns. Energy was the best preforming sector, up 3.42%. WTI Crude Oil posted slightly stronger gains than Brent Crude Oil. The Seaway pipeline was expanded, allowing more crude to move from Cushing, Oklahoma to the Gulf Coast, where it can be sold at higher prices. Agriculture increased 3.08% on the back of colder weather in the US Midwest which could threaten grain production. Soybeans was supported by US demand, which continues to be strong. Corn also increased following the latest World Agriculture Supply and Demand report. The USDA reduced its ending inventory estimate below expectations, due to increased feed usage and export expectations. Wheat increased slightly after Argentina’s agricultural ministry cut its wheat production forecast, citing extreme weather as the reason for the decline. Industrial Metals gained 2.29%, supported by signs of improving global growth. Precious Metals was relatively unchanged, up 0.20%. While upbeat economic data from the world top economies weighed on Gold, Silver still seemed to benefit from expectations the Federal Reserve would continue its monetary easing policies. Livestock was the worst performing sector, down 1.31%. While Live Cattle led the sector lower, Lean Hogs posted a slight increase. The USDA Livestock Slaughter Report for December showed reduced lean hog supplies relative to November and December 2012.
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 January 31st, 2013 the team managed approximately USD 11.6 billion in assets globally.