Commodities saw a drop-off in performance for June, Credit Suisse Asset Management reports, with the Bloomberg Commodity Index turning in a negative total return for the month. Of the 22 index components, 12 reported losses.
Credit Suisse noted the following about the performance of various index groups:
- Energy was down 3.74%, with rising production out of Nigeria and Libya hitting crude oil and petroleum products.
- Precious metals was off 3.12%, on expectations that the Fed would move more strongly to reduce its balance sheet.
- Livestock dipped 1.88%, on the influence of live cattle, as the USDA noted that production of beef was above its five-year average.
- Agriculture rose 3.08%, on concerns about the upcoming US spring wheat crop that faces dry and hot weather in the Northern Plains.
- Industrial metals gained 3.37%, as markets became hopeful that China’s tightening of credit would not impact economic stability.
Christopher Burton, senior portfolio manager, Credit Suisse total commodity return strategy, noted, “the demand for Precious Metals continues to be influenced by the strength of the US Dollar and safe haven demand. The trend of higher interest rates may hurt precious metals demand, unless offset by greater inflation, while safe haven demand is likely to remain intact.”
Credit Suisse also notes that inflation has been contained as a result of low energy prices. Markets are watching to see if increased production in Nigeria and Libya will be sustainable, and also wonderiif other OPEC members will take action to curtail the impact of the rising supply.
Industrial metals continue to feel the impact of labor disputes, and restrictions on the production of certain metals on environmental concerns. Also, with the livestock market’s view of the US as a safe supplier, the country could gain a higher share of the beef market, as Brazil faces a meat scandal and inquiry into corruption.
Nelson Louie, global head of commodities, Credit Suisse Asset Management, said, “Recoveries of major economies seem to be moving in the same direction. Reported manufacturing activity in the US and Europe remained in expansion territory, while China returned to a slight expansion in June, which may be supportive of base metals demand.”
He added that consumer confidence levels in the US and parts of the Eurozone have risen, and that central banks continue to be accommodating in the face of these positive economic indicators. Besides, concerns about the pace of Chinese growth have abated following the Chinese central bank’s indication that it would continue to support economic growth, even as it clamps down on credit availability.