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Commodity Market Decreased in February Amid Mixed Macroeconomic Indicators
Nelson Louie, Global Head of Commodities in Credit Suisse’s Asset Management business, said, “Macroeconomic factors were mixed for February, though ultimately acted as a headwind for Commodities. A broad improvement in European manufacturing Purchasing Managers Indices was offset by a much weaker reading in Italy, along with concerns over Italy’s recent election results. Uncertainty following the Italian parliamentary elections took center stage at the end of the month and across commodity markets. China’s official PMI was also reported lower than expected for February. The ensuing weak sentiment saw oil products and both base and precious metals decline. US dollar strength driven by Euro weakness on the back of the PMI numbers and macroeconomic concerns also weighed on commodities.”
Christopher Burton, Senior Portfolio Manager for the Credit Suisse Total Commodity Return Strategy, added, “The rate of global growth remains a key to commodity performance. As evidenced in February, headline risk will continue to play a role in short-term commodity market movements. Commodities could benefit from a rebound in global growth along with continued low interest rates. US Federal Reserve Chairman Ben Bernanke strongly defended the US central bank’s monetary stimulus policies before Congress, easing financial market worries over a possible early retreat from bond purchases. 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 down by 4.09% in February. Overall, 19 out of 22 index constituents posted negative returns. Precious Metals was the worst performing sector, down 6.25%, despite US Federal Reserve Chairman Ben Bernanke’s reaffirmation of his commitment to strong stimulus measures. Industrial Metals decreased, down 5.63%, due to speculation over monetary tightening in China and questions regarding surpluses of some metals. For example, aluminum inventories in China’s main trading regions are estimated to have climbed to a record as supply growth outpaced demand in the largest user and producer of the metal. Livestock also decreased, down 4.89%, led by Lean Hogs, as weak packing margins continued to weigh on the sector. Agriculture declined 3.72% as crop-friendly weather in South America and the US Midwest improved harvest prospects for grains. Expectations of higher global Corn supplies also weighed on the sector. Energy ended the month lower, down 2.55%. WTI Crude Oil was the worst performing sector component, partly as a result of the Seaway pipeline operating at reduced flow rates due to the high inventory build-up at the Jones Creek terminal at the Gulf Coast end of the pipeline.
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 February 28th, 2013 the team managed approximately USD 11.3 billion in assets globally.