December commodities figures were good thanks to positive fundamentals in the industrial metals and energy sectors, says a new report by Credit Suisse.
Nelson Louie, Global Head of Commodities in Asset Management business at Credit Suisse, said:
“The 2014 global economy looks to be the most orderly in several years, centering on modest yet stable growth. We expect global growth to accelerate gradually in 2014, with most of the pick-up occurring in developed market economies, narrowing the growth gap with the Emerging Markets. We believe this steady uptick in growth may be beneficial to commodities.”
Christopher Burton, Senior Portfolio Manager for Total Commodity Return Strategy at Credit Suisse, commented:
“Amid macroeconomic improvements in the US and abroad, correlations between commodities and traditional asset classes have been decreasing. We expect individual commodities to continue to be increasingly driven by fundamental factors rather than macroeconomic headlines.”
“While broad macroeconomic trends continue to be important, they will likely impact asset classes in different ways. We continue to expect commodities to provide valuable diversification benefits going forward.”
There was a 1.24% increase in the Dow Jones-UBS Commodity Index Total Return in December 2014. Out of 22 index constituents, eleven posted positive returns.
Of all December commodities Industrial Metals performed best
Industrial Metals rose 4.89% in December, as promising data coming out of the United States boosted metals’ demand outlook.
Energy had a good month, appreciating 4.81%. WTI Crude Oil did better than Brent Crude Oil as greater capacity came online, pointing to greater transport of crude oil out of the US Midwest “helping to reduce the discount of WTI to other crude oil grades.”
Livestock, led by Lean Hogs, fell 1.96%. Live Cattle saw a slight increase on expectations of reduced feedlot inventories in the Southern Plains, as well as reports of cash rich markets late in the month.
Agriculture fell by 2.8% “as rains across major exporter Argentina and other South American countries eased heat stress on Corn and Soybeans and weighed on the sector overall.”
China, which has become stricter regarding accepting certain types of genetically-modified grains, refused to accept a large shipment of dried distillers grain (DDGs, a by-product of corn) from the United States. This, plus some other factors weighed on Corn.
Precious metals fells 3.71%. Since US unemployment rates hit the 7% mark and the US Federal Reserve started scaling back on its stimulus program, investors have moved away from gold as a safe haven.