Investors hedge against US Feb job jolt in auction
Fri Mar 4, 2005 08:15 AM ET
NEW YORK, March 3 (Reuters) - Hedgers and speculators on Friday were generally betting on a strong February U.S. payrolls report, in an economic derivative auction, though a large number were also hedging against a downside surprise.
The auction showed an implied market forecast of a 243,300 increase in U.S. non-farm payrolls. That was up from a 235,200 prediction in the first leg of the auction on Thursday and above the median forecast of 220,000 by economists in a Reuters poll.
The U.S. Labor Department will release payroll numbers at 8:30 a.m. EST (1330 GMT).
The distribution of positions showed a large cluster of players ready for a much stronger-than-expected report.
No less than 55 percent of auction participants, weighted by the size of their positions, were ready for a payrolls figure above 225,000 and 10 percent looked for a result higher than 425,000. Auction strikes come in blocks of 25,000 from 0 to 425,000 and above.
Some 37 percent were hedging on a number less than 200,000 with a hefty 11.1 percent focused on a result from 150,000 to 175,000 -- the single largest block in the entire auction.
A strong payrolls report on Friday seems plausible after the Institute for Supply Management said on Thursday that employment in the services sector, which accounts for about 80 percent of the U.S. economy, expanded at its fastest rate in February since the group began keeping track in 1997.
Economic derivatives, offered by Deutsche Bank, Goldman Sachs and interdealer broker ICAP, have a good history of showing how markets are positioned ahead of important economic figures, compared with the forecasts of economists.