Commodities Fall Flat in October



Commodities were relatively flat in October, largely driven by fundamental factors, according to Credit Suisse Asset Management.

In addition, the Bloomberg Commodity Index Total Return performance was slightly negative for the month, with 12 out of 22 index constituents trading lower.

Energy was the worst performing sector, down 3.32%. Natural gas led the sector lower due to mild weather and inventory levels near their highest in the past decade for this time of year.

Industrial metals decreased 2.81%, led lower by aluminum. Increased aluminum smelting capabilities out of China, the world’s largest producer, raised concerns over a deepening of the global oversupply of aluminum.

Agriculture ended the month 1.58% higher amid unfavorable weather conditions. Sugar increased the most as disruptive weather, potentially impacted by El Niño, including dryness in India and excess rainfall in Brazil, the two largest growing regions in the world, continued to reduce sugar output expectations.

Precious metals was the best performing sector, up 3.59%. Weaker-than-expected U.S. economic data reported during the first half of the period reduced expectations of a near-term interest rate hike, depressing the U.S. Dollar and increasing safe haven demand. Sentiment regarding U.S. monetary policy shifted later in the month, leading the U.S. dollar to recover and ultimately finish the month stronger, while gold and silver still posted gains.

“October continued to be characterized by fundamental factors, particularly supply surpluses in the energy and industrial metals sectors. In the near-term, weather-related risks, including the global El Niño event, will continue to impact returns for the agriculture sector. Global growth expectations will also be a focus of commodity returns,” said Nelson Louie, global head of commodities for Credit Suisse Asset Management. “China’s economic growth fell to a six-year low as signs of manufacturing activity remained weak, which led the People’s Bank of China to lower lending rates and the reserve requirement to stimulate its economy. In Europe, although economic data indicated modest expansion, manufacturing activity growth flattened after gaining momentum in the spring. As a result, the European Central Bank re-affirmed its commitment to quantitative easing measures in an ongoing effort to boost its economy and minimize disinflation concerns.”


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