-- Fed funds futures show reduced chance of rate cut --
By Kyle Peterson
CHICAGO, Feb 7 (Reuters) - Federal fund futures slipped on
Friday at the Chicago Board of Trade, suggesting a diminished
chance of a Federal Reserve interest rate cut after the release
of a much stronger-than-expected U.S. jobs report.
The Labor Department reported that U.S. payrolls added
143,000 nonfarm jobs in January, compared with December's loss
of 156,000 jobs. The jobless rate, meanwhile, declined
unexpectedly to 5.7 percent from 6.0 percent in December.
While the data were stronger than most analysts forecast,
traders kept their gaze on the growing geopolitical tensions
that are creating demand for safe haven debt.
Those tensions are just strong enough to keep the chance of
additional Fed easing factored into market prices for the
foreseeable future, analysts said.
"I don't think people are going to want to stay too short
ahead of a possible war," said Joe Giagrande, bond trader at
Gelber Group. "Apparently this hasn't changed Fed expectations
that much."
Fed funds futures are used by some analysts to gauge future
Fed rate moves. The jobs data triggered a mild sell-off in the
futures. At 8 a.m. CST (1400 GMT), March Fed funds <FFH3> were
down 5 basis points.
Based on the March Fed funds contract, Giagrande calculated
a 20 percent chance for a 25-basis-point rate cut at the March
Fed policy meeting. That is down from a 25 percent chance seen
prior to the data release, he said.
The central bank's target for the overnight lending rate
between banks has been at a 40-year low of 1.25 percent since
November.
Other analysts noted a nearly unchanged interest rate
outlook for the first half of 2003 after the jobs report.
"It was strong, but there's so many concerns in the
market," said Joe Shatz, futures and options strategist at
Merrill Lynch. "Yesterday the total probability of an ease by
the June meeting was 44 percent. Today it's 36 percent. So the
changes are not significant."
Stock index futures gained after the jobs report. Standard
& Poor's 500 index futures <SPH3> were up 0.64 percent. Nasdaq
100 index futures <NDH3> were up 0.92 percents.
((Reporting by Kyle Peterson; kyle.peterson@reuters.com;
Reuters Messaging: kyle.peterson.reuters.com@reuters.net;
312-408-8750))
(C) Reuters 2003. All rights reserved. Republication or redistribution of
Reuters content, including by caching, framing or similar means, is expressly
prohibited without the prior written consent of Reuters. Reuters and the Reuters
sphere logo are registered trademarks and trademarks of the Reuters group of
companies around the world.
nN07299811
07-Feb-2003 14:40:03 GMT
Source RTRS |
