Murray Ends Britain’s 74-Year Wait for Wimbledon Final Place

By Danielle Rossingh - Jul 7, 2012 3:11 AM GMT+0700

Andy Murray became the first British man in 74 years to reach the Wimbledon final, beating Jo- Wilfried Tsonga for a berth against six-time champion Roger Federer.

Murray defeated the Frenchman 6-3, 6-4, 3-6, 7-5 on Centre Court to end a run of three straight semifinal losses. Federer earlier reached a record eighth men’s final at the All England Club by beating defending champion Novak Djokovic.

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Andy Murray of Great Britain celebrates a point during his Gentlemen's Singles semi final match against Jo-Wilfried Tsonga of France on day eleven of the Wimbledon Lawn Tennis Championships at the All England Lawn Tennis and Croquet Club on July 6, 2012 in London, England. Photographer: Paul Gilham/Getty Images

“At the end of the match it was obviously very emotional,” Murray said in a news conference. “Haven’t really been like that before in a semifinal match, so obviously it meant something to me and it was very, very important.”

Oddsmakers installed Federer at the 4-9 favorite for the title.

Murray won with a forehand return that landed on the line. It was called out, and he successful appealed the decision to become the first British man in the Wimbledon final since Henry “Bunny” Austin in 1938. The victory ends a run of 11 defeats for British men in the Wimbledon semifinals since Austin’s success, which occurred when Queen Elizabeth II’s father, King George VI, was on the throne.

No British man has taken a Grand Slam singles title since Fred Perry won the U.S. Championships in 1936. Perry also won Wimbledon that year, and his statue is the first thing spectators see when they enter the grounds.

Murray pointed his index fingers to the sky and dropped to his knees after the victory. He has lost all three Grand Slam finals he’s played: the 2008 U.S. Open and 2010 Australian Open to Federer, and the 2011 Australian to Djokovic of Serbia.

Federer Favored

The 25-year-old Murray has won eight of the 15 times he’s played Federer. U.K. gambling website William Hill gives Federer odds of 4-9 to win in the championship match on July 8, which means a successful $9 beat would return $4 plus the original stake. Murray is the 13-8 underdog.

The 30-year-old from Switzerland beat Djokovic, the top seed and defending champion, in the day’s first semifinal to move closer to regaining the top ranking in men’s tennis.

Federer, the winner of a men’s record 16 Grand Slam singles titles, defeated the 25-year-old 6-3, 3-6, 6-4, 6-3 under the roof on Centre Court.

‘Murray Mania’

“Murray Mania” in the British media has been on the increase with every win, especially after two-time champion Rafael Nadal was upset in the second round by 100th-ranked Lukas Rosol of the Czech Republic. Murray, who lost to Nadal in the two previous semifinals, had been drawn in the same half as the Spanish left-hander.

Murray played a tactical match against the hard-hitting Tsonga in the first two sets, pulling him into the net with drop shots followed by passing shots. Murray won the first set with a forehand as the crowd roared. The 27-year-old Tsonga asked for the trainer after he lost the second set, with Murray barely making an error.

Tsonga, who used powerful ground strokes to beat Federer from two sets down in the quarterfinals last year, won the third set as he rushed to the net and dictated the points. Serving for the third set at 5-3, Tsonga sank to his knees after a serve hit him in the crotch. He recovered to win the set when Murray netted a return.

Murray broke for a 3-1 lead in the fourth set, only for Tsonga to break back with a crushing forehand return at Murray’s feet.

Oldest Semifinalist

Federer, the oldest semifinalist, hasn’t won a major title since the 2010 Australian Open. His seventh Wimbledon championship would tie the men’s record held by Pete Sampras and William Renshaw. He’d never played Djokovic on grass.

“It was obviously a big occasion,” Federer told reporters. “These matches only help my confidence. I hope I can use it then for the finals.”

If he wins the title, he’ll reclaim the top spot in the ATP World Tour rankings, where he’s one week short of tying Sampras’s record of 286 weeks at No. 1.

“I’ve got a tough task ahead of me,” Federer said. “There is a lot on the line for me, the No. 1. There will be pressure.”

Djokovic said he had felt ill for almost a week.

“I had bad last couple days,” he said in a news conference. “Last five, six days I wasn’t feeling great. But I don’t want to talk about it now.”

Royal Box

Under the Centre Court roof and watched by former champion Rod Laver and singer Kylie Minogue from the royal box, Djokovic handed Federer a break point in the first set as he lunged for a backhand volley that landed in the net. Federer broke as Djokovic netted another backhand. Serving at 5-3, Federer took the set in 24 minutes with a forehand winner.

Improving his returns in the second set, Djokovic broke serve for a 2-0 lead as a backhand down the line forced Federer into an error. He served out the set with his fifth ace.

At 2-3 down in the third, Djokovic fought off two break points in a game of baseline rallies as long as 26 shots. Serving at 4-5 down, Djokovic handed Federer two set points with a smash that sailed long. He saved one with a forehand winner, only for Federer to take a two-sets-to-one lead with a smash.

Service Problems

Djokovic kept on struggling with his serve, getting broken in the opening game of the fourth set. Federer took a 3-0 lead and served out the match as Djokovic hit a forehand return into the net, his 21st error. Federer only made 10 errors and produced 31 winners, three more than his opponent.

“In the start of the fourth set I dropped in the energy level, I thought,” Djokovic said. “I played really a couple of sloppy games, very slow, with no pace, very low percentage of first serves. When you don’t have free points from the first serve, it’s very difficult to kind of get in the rhythm and the control of the match when you have an opponent as Federer.”

To contact the reporter on this story: Danielle Rossingh at Wimbledon through the London sports desk at drossingh@bloomberg.net

To contact the editor responsible for this story: Christopher Elser at celser@bloomberg.net

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Companies Using Overtime, Temporary Staff to Meet U.S. Demand

By Shobhana Chandra and Rich Miller - Jul 7, 2012 2:43 AM GMT+0700

Companies are relying on existing workers and temporary employees instead of hiring, evidence the European crisis is hurting U.S. confidence more than demand.

The average workweek climbed by six minutes to 34.5 hours in June, the first gain since February, Labor Department figures showed today in Washington. Temporary staffing rose by 25,200, the third consecutive increase.

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Retailers reported this week that same-store sales rose 0.3 percent in June from a year earlier, based on results from more than 20 companies tracked by Retail Metrics Inc. Photographer: Scott Eells/Bloomberg

The need to boost hours and add provisional employees is a sign that sales are holding up in the face of a deepening slump in Europe and a slowdown in China and the rest of the world. Nonetheless, businesses may lack conviction that revenue gains will be sustained in light of the threats, making them reluctant to permanently expand payrolls.

“Firms are still seeing an increase in demand, and there is a need for more labor,” said Nigel Gault, chief U.S. economist at IHS Global Insight in Lexington, Massachusetts. “But there are so many risks out there that businesses don’t want to commit to hiring full-time employees.”

Payrolls advanced by 80,000 workers in June, fewer than the median estimate of 100,000 in a Bloomberg News survey of economists, after a 77,000 rise the prior month, today’s report showed. The lack of hiring fueled concern the world’s largest economy was slowing, pushing stocks down, with the Standard & Poor’s 500 Index heading for its biggest weekly loss in a month.

The pickup in hours “suggests there might be a little better momentum in the economy,” Bruce Kasman, chief economist for JPMorgan Chase & Co. in New York, said on a conference call. At the same time, there is “an absence of a real desire by firms to act on that in terms of hiring.”

Payroll Equivalent

The six-minute increase in the average workweek would be equivalent to a 325,000 gain in payrolls, according to estimates by economists at Nomura Securities International Inc. headed by Lewis Alexander.

Automobiles are one area where demand is holding up. Cars and light trucks sold at a 14.1 million annual rate in June, up from May’s 13.7 million pace, Ward’s Automotive Group data showed. General Motors Co. (GM), Ford Motor Co. (F) and Chrysler Group LLC reported U.S. sales that topped analysts’ estimates, helping the industry surpass projections and stay on pace for the best year since 2007.

“We’re seeing strong demand for our current products as well as for our new models,” Bill Krueger, vice chairman of the Americas for Nissan Motor Co., said in a telephone interview. The Yokohama, Japan-based automaker plans to boost hours, add shifts or increase payrolls at plants in Tennessee and Mississippi “to really have the supply catch up with demand,” he said.

Factory Workweek

Manufacturers were among those asking existing employees to put in a longer workweek last month. Factory overtime climbed to 4.7 hours in June on average, the most in five years, today’s report showed.

In another bright spot, workers’ average hourly earnings rose to $23.50 in June from $23.44 in the prior month, today’s report showed.

“For the 92 percent of folks who have jobs, their incomes are rising, raises are still happening,” said Chris Varvares, senior managing director of Macroeconomic Advisers LLC in St. Louis.

Consumers are benefiting from falling gasoline prices and lower inflation. The cost of living dropped in May by the most in more than three years, Labor Department figures showed last month. A gallon of regular fuel at the pump cost an average $3.36 as of yesterday, down from this year’s peak of $3.94 in early April, according to AAA, the biggest U.S. auto group.

Retail Sales

Retailers reported this week that same-store sales rose 0.3 percent in June from a year earlier, based on results from more than 20 companies tracked by Retail Metrics Inc. Luxury chains such as Saks Inc. (SKS) and discounters like TJX Cos. topped analysts’ expectations, while stores targeting middle-income consumers trailed projections.

“What we are seeing today from an income perspective is our economy is modestly adding jobs,” Robert Hull, chief financial officer at Lowe’s Cos., the second-largest U.S. home- improvement retailer, said at a June 26 consumer conference in Boston. “That’s the good news. The bad news is it’s not sufficient to have a material impact on the unemployment rate.”

The jobless rate held at 8.2 percent in June, today’s report showed. Unemployment has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.

Fed Outlook

The “mixed” jobs report suggests that Federal Reserve policy makers are unlikely to take further action to boost the economy at their next meeting, such as a third round of so- called quantitative easing, said David Greenlaw, a managing director and economist at Morgan Stanley in New York.

“We don’t think the report was quite bad enough to tip the scales toward doing something like QE3,” Greenlaw said. “But I certainly think there’s plenty of fodder for discussion and definitely some indication that the Fed needs to be more worried about prospects for growth going forward.”

Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months. Retailers cut payrolls by 5,400, while manufacturers added 11,000 workers.

The report “reminds everyone that confidence matters,” said Joel Naroff, president of Naroff Economic Advisors in Holland, Pennsylvania. “In June, the European debt issue reached a boil and a meltdown could not be ruled out. That had to have a major impact on business confidence.”

Europe’s Influence

Concerns about Europe are lingering, with the euro slumping to a two-year low of $1.2260 today and yields on 10-year Spanish bonds rising to more than 7 percent. The decline in Spanish bond prices came even though the European Central Bank yesterday reduced its benchmark rate to a record low of 0.75 percent.

Uncertainty about the U.S. government’s fiscal outlook may also be hampering hiring plans. Congress has yet to resolve the so-called fiscal cliff, which represents more than $600 billion in higher taxes and reductions in defense and other government programs in 2013 that will take place without action.

The best strategy for companies to follow when confronted with such uncertainty ahead of Dec. 31 is to “stay lean and keep your inventories taut,” Sandy Cutler, chief executive officer of industrial equipment-maker Eaton Corp. (ETN) in Cleveland, told a conference May 31.

To contact the reporter on this story: Rich Miller in Washington at rmiller28@bloomberg.net Shobhana Chandra in Washington at schandra1@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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Obama Fails to Gain as Unemployment Stuck Since March

By Mike Dorning and Kate Andersen Brower - Jul 7, 2012 3:58 AM GMT+0700

Damian Dovarganes/AP Photo

Job seekers at a job fair in Los Angeles.

Job growth remained stuck in June, depriving President Barack Obama of progress on voters’ overriding concern as he campaigned in industrial Ohio and Pennsylvania.

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July 6 (Bloomberg) -- U.S. Secretary of Labor Hilda Solis talks about the June employment report and steps government can take to boost the creation of jobs. Solis speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Jim Talent, an economic adviser to Republican presidential candidate Mitt Romney and a former Missouri senator, talks about the June U.S. employment report and contrasts President Barack Obama's economic policies with the Romney's proposals. Talent speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Austan Goolsbee, a professor at the University of Chicago Booth School of Business and a former chairman of the White House Council of Economic Advisers, talks about the June U.S. employment report and the economy. Goolsbee speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Randall Kroszner, a professor at the Booth School of Business at the University of Chicago and a former Federal Reserve governor, talks about the June U.S. employment report and Fed policy. Payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed today. The unemployment rate held at 8.2 percent. Kroszner speaks with Betty Liu and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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U.S. employers added 80,000 jobs last month, below economists’ forecasts and up only slightly from a 77,000 increase in May.

As the November presidential election approaches and voters’ views of Obama’s performance solidify, the encouraging job gains at the start of the year have stalled. June concluded the worst quarter for private-sector hiring in more than two years, with last month’s 8.2 percent unemployment rate no better than in March.

Democrat Obama, speaking today at a campaign stop in Poland, Ohio, said the new jobs were “a step in the right direction” though the economy has to grow “even faster.”

Republican presidential candidate Mitt Romney called the jobs report “another kick in the gut.”

“The president’s policies have not gotten America working again, and the president is going to have to stand up and take responsibility for it,” Romney said at a hardware store in Wolfeboro, New Hampshire, where he’s vacationing this week.

Chances are slipping for an Election Day unemployment rate below 8 percent, a psychological milestone for voters, said Patrick Sims, a director at Hamilton Place Strategies, a Washington policy and communications firm co-founded by former Republican White House and Treasury press aides.

Final Stop

“Time has run out” to reach that goal, Sims wrote in a note to clients, calculating that the economy would need to add an average of 219,000 jobs during the next four months.

At the final stop of the two-day bus trip through Ohio and Pennsylvania, Obama told approximately 6,500 people at Carnegie Mellon University in Pittsburgh that “inch by inch, yard by yard, mile by mile” the economy is starting to grow again.

He repeated a campaign theme that rebuilding the economy isn’t from “the top down” but from “the middle class out.” Obama told the crowd, standing in 93 degree heat, that Romney’s plan to cut taxes for the wealthy was the same plan tried “before I took office. We tried it and it didn’t work.”

Obama has “got to be concerned about” the “sideways” jobs report, said John Podesta, a White House chief of staff under Democratic President Bill Clinton, in an interview for Bloomberg Television’s “Political Capital with Al Hunt” airing this weekend. At the same time, Podesta added, “I don’t think it’s a disaster either.”

Monthly ‘Referendum’

The monthly report has taken on so much political significance amid voter discontent with the economy that it amounts to a regular “referendum” on the president, said Kathleen Hall Jamieson, a professor at the University of Pennsylvania’s Annenberg School for Communication in Philadelphia.

“Once every month the public sees it as a signal of either the competence of the president or his failures,” Jamieson said in an interview before the report’s release. The Dow Jones Industrial Average (INDU) and “the unemployment rate are among the few things that voters can see over time as a continuing indicator that they understand.”

The Standard & Poor’s 500 Index slid 0.9 percent to 1,354.67 at 4 p.m. in New York, sending it lower for the week. Treasury 10-year yields fell five basis points to 1.55 percent.

Underemployment Rises

Private forecasters had expected the Labor Department report to show 100,000 new jobs last month, according to the median estimate of economists surveyed by Bloomberg News.

Joblessness has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 14.9 percent from 14.8 percent.

Obama used his trip to draw a contrast with Romney, who co- founded Bain Capital LLC, based in Boston.

Romney’s experience “has been in owning companies that were called pioneers of outsourcing,” Obama said yesterday while campaigning in Maumee, Ohio. “My experience has been in saving the American auto industry, and as long as I’m president, that’s what I’m going to be doing.”

Shortly before the president’s arrival in Ohio yesterday, his administration announced that it had filed a complaint with the World Trade Organization accusing China of levying unfair tariffs on U.S. autos.

The duties cited in the WTO claim cover more than 80 percent of U.S. auto exports to China, including cars made in the Ohio cities of Toledo and Marysville, White House press secretary Jay Carney told reporters during the flight to Ohio from Washington yesterday.

To contact the reporters on this story: Mike Dorning in Washington at mdorning@bloomberg.net; Kate Andersen Brower in Pittsburgh at kandersen7@bloomberg.net

To contact the editor responsible for this story: Steven Komarow at skomarow1@bloomberg.net

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Christie Filmed Shouting at Heckler on Jersey Boardwalk

By Terrence Dopp - Jul 7, 2012 3:10 AM GMT+0700

New Jersey Governor Chris Christie was filmed shouting at a detractor yesterday on the Seaside Heights boardwalk and the footage was posted to gossip website TMZ.com.

The Republican, who has made it clear he’s no fan of the “Jersey Shore” reality-show cast for what he says is loud and obnoxious behavior, was seen in the 29-second video in a heated exchange with a person who criticized his education policies, the website reported.

Christie, who clutches an ice cream cone during the video, was with his family on the boardwalk, TMZ reported. The governor, 49, at one point marches toward the critic as an entourage follows him.

“You’re a real big shot -- keep shooting your mouth off,” Christie, who travels with a cadre of state troopers, tells the man. “You’re a real big shot. Keep walking away. Big shot.”

Michael Drewniak, a spokesman for Christie, didn’t immediately return an e-mail seeking comment.

Christie, who took office in January 2010, has said he once asked New York Governor Andrew Cuomo to take back the cast of the “Jersey Shore,” which he said is made up of New York residents who reinforce the worst stereotypes of the Jersey Shore as a playground.

To contact the reporter on this story: Terrence Dopp in Trenton at tdopp@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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Stocks Fall as Treasuries Rise After U.S. Jobs Report

By Michael P. Regan and Lu Wang - Jul 7, 2012 3:50 AM GMT+0700

Stocks (SXXP) and commodities sank, while Treasuries rose for a second day, as slower-than-forecast growth in U.S. payrolls fueled concern the economic recovery is slowing. The dollar strengthened against 14 of 16 major peers, with the euro setting a two-year low of $1.2266.

The Standard & Poor’s 500 Index slid 0.9 percent to 1,354.67 at 4 p.m. in New York, sending it lower for the week. Treasury 10-year yields fell five basis points to 1.55 percent. Spain’s 10-year yield climbed as much as 26 basis points to 7.04 percent, while the yield on German two-year notes fell below zero. Three-month Euribor, or the rate European banks say they see each other lending in euros, fell to an all-time low. Oil, natural gas and wheat lost more than 3 percent to help lead commodities lower.

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Traders work on the floor of the New York Stock Exchange. Photographer: Scott Eells/Bloomberg

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July 6 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., and Kathy Boyle, president and founder of Chapin Hill Advisors, talk about the outlook for stocks, Federal Reserve monetary policy and the U.S. dollar. They speak with Adam Johnson and Alix Steel on Bloomberg Television's "Street Smart." Jason Schenker of Prestige Economics LLC also speaks. (Source: Bloomberg)

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July 6 (Bloomberg) -- Steven Bell, chief economist at GLC Ltd., discusses yesterday's European Central Bank policy announcement and the U.S. economy ahead of today's non-farm payrolls report for June. He talks with Mark Barton and Linzie Janis on Bloomberg Television's "Countdown." (Source: Bloomberg)

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July 6 (Bloomberg) -- Neel Kashkari, head of global equities at Pacific Investment Management Co., talks about the June payrolls report, the global economy and investment strategy. Kashkari speaks with Erik Schatzker and Scarlet Fu on Bloomberg Television's "Market Makers." (Source: Bloomberg)

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July 6 (Bloomberg) -- Bruce Kasman, chief economist at JPMorgan Chase & Co., talks about the European sovereign-debt crisis and outlook for the U.S. economy and labor market. He speaks with Tom Keene and Scarlet Fu on Bloomberg Television's "Surveillance." (Source: Bloomberg)

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July 6 (Bloomberg) -- Russ Koesterich, global chief investment strategist for the IShares unit of BlackRock Inc., talks about the U.S. June payrolls report, the economy and market strategy. Koesterich speaks Betty Liu, Dominic Chu and Sheila Dharmarajan on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Austan Goolsbee, a professor at the University of Chicago Booth School of Business and a former chairman of the White House Council of Economic Advisers, talks about the June U.S. employment report and the economy. Goolsbee speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

Global equities extended losses this morning after U.S. Labor Department data showed payrolls increased 80,000 last month, less than a 100,000 gain forecast in a Bloomberg survey. The European Central Bank yesterday reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month as policy makers tried to revive the global economy.

“There is weakness around the world,” Stephen Roach, a professor at Yale University and former non-executive chairman for Morgan Stanley in Asia, said in an interview on Bloomberg Television. “When you are at extremely low levels of policy interest rates, you can’t expect that that’s going to jump-start the economy.”

Alcoa Inc., Hewlett-Packard Co., Caterpillar Inc., Bank of America Corp. and International Business Machines Corp. lost at least 2 percent to lead declines in the Dow Jones Industrial Average. (INDU)

Technology Shares

Informatica Corp. (INFA) slumped 28 percent, the most in 11 years, after the software provider reported second-quarter earnings and revenue that missed analysts’ estimates. Technology companies fell 1.8 percent as a group, the most among 10 industries in the S&P 500. Teradata Corp. and Citrix Systems Inc. sank more than 7.5 percent for the biggest declines in the S&P 500.

Today’s losses left the S&P 500 down 0.6 percent for the week. The labor report showed the unemployment rate held at 8.2 percent. Private employment, which excludes government jobs, increased 84,000 in June, the weakest in 10 months. Today’s data is the last monthly report before the Federal Reserve’s next policy meeting. The Federal Open Market Committee is scheduled to releases its statement on monetary policy and the economic outlook on Aug. 1.

‘Sustained Improvement’

“The Fed is looking for sustained improvement in the labor market,” John Canally, an economist and investment strategist at LPL Financial Corp. in Boston, said in a telephone interview. The firm oversees about $330 billion. “This report does push the Fed closer to quantitative easing. If the current trend continues, they are almost going to have to do something later this year.”

The government’s previous employment report on June 1 showed 69,000 jobs were created in May, the weakest growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. Since then, the S&P 500 had rallied 7 percent through yesterday and 10-year rates have increased.

The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa Inc. is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.

Earnings Season

Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent.

Earnings at energy companies fell 16 percent to lead the decline among the 10 main groups in the S&P 500, the estimates show, followed by a 12 percent decrease in profits at raw- material producers. Crude oil tumbled 18 percent in the second quarter to drag the S&P GSCI Index of commodities down 13 percent, the worst declines for both since the final three months of 2008.

Five shares fell for each that advanced in the Stoxx Europe 600 Index, which slid 1 percent and trimmed its weekly gain to 1.3 percent. Spain’s largest banks, Santander SA and Banco Bilbao Vizcaya Argentaria SA (BBVA), fell at least 3.9 percent. Fifteen of 19 groups in the Stoxx 600 retreated. Industrial production decreased for the ninth month in May, the National Statistics Institute in Madrid said.

A gauge of car companies tumbled 3.3 percent to lead declines after PSA Peugeot Citroen reported that first-half deliveries dropped 13 percent from a year earlier and its share of the European market declined. The region’s second-biggest carmaker tumbled 7.7 percent.

Euro Slumps

The euro extended its weekly loss against the dollar to more than 3 percent, the worst drop since September. The shared currency weakened against 14 of 16 major peer today and 15 of 16 over the last week.

The rate on German two-year notes was at minus 0.01 percent. The euro interbank offered rate, or Euribor, for three- month loans was 0.549 percent, compared with 0.641 percent yesterday, European Banking Federation data showed.

The cost of insuring against default on European sovereign debt rose for a third day, with the Markit iTraxx SovX Western Europe Index of contracts on 15 governments climbing 8.1 basis points to a midprice of 285.5.

Commodities Drop

Oil in New York dropped 3.2 percent to settle at $84.45 a barrel. Corn ended a 12 percent rally over three days that was due to dry weather crop damage in the U.S., the world’s biggest exporter of the grain. All but five of the 24 commodities tracked by the S&P GSCI Index declined, with natural gas, cocoa, oil, nickel and wheat losing more than 2.5 percent to lead declines.

The MSCI Emerging Markets Index (MXEF) lost 1 percent, trimming its weekly advance to 0.9 percent. The Micex Index fell 1.5 percent in Moscow. Samsung Electronics Co., the world’s largest maker of televisions and mobile phones, dragged South Korea’s Kospi Index down 0.9 percent after sales missed estimates. The Shanghai Composite Index gained 1 percent as shares of developers and industrial companies advanced.

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Lu Wang in New York at lwang8@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Payrolls in U.S. Rose 80,000 in June; Jobless Rate 8.2%

By Alex Kowalski - Jul 7, 2012 3:11 AM GMT+0700

American employers added fewer workers to payrolls than forecast in June and the jobless rate stayed at 8.2 percent as the economic outlook dimmed.

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At a job fair in New York City. Photographer: Scott Houston/Corbis

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Job seekers wait to speak to recruiters at the "Putting America Back To Work!" job fair in New York. Photographer: Victor J. Blue/Bloomberg

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July 6 (Bloomberg) -- Austan Goolsbee, a professor at the University of Chicago Booth School of Business and a former chairman of the White House Council of Economic Advisers, talks about the June U.S. employment report and the economy. Goolsbee speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Bloomberg economist Joseph Brusuelas talks about the June U.S. employment report. Payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed today in Washington. The unemployment rate held at 8.2 percent. (Source: Bloomberg)

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July 6 (Bloomberg) -- Randall Kroszner, a professor at the Booth School of Business at the University of Chicago and a former Federal Reserve governor, talks about the June U.S. employment report and Fed policy. Payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed today. The unemployment rate held at 8.2 percent. Kroszner speaks with Betty Liu and Michael McKee on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Jim Talent, an economic adviser to Republican presidential candidate Mitt Romney and a former Missouri senator, talks about the June U.S. employment report and contrasts President Barack Obama's economic policies with the Romney's proposals. Talent speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- John Silvia, chief economist at Wells Fargo Securities LLC, talks about U.S. labor market and economic outlook. Silvia speaks with Tom Keene, Scarlet Fu and Michael McKee on Bloomberg Television's "Surveillance." (Source: Bloomberg)

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July 6 (Bloomberg) -- Neel Kashkari, head of global equities at Pacific Investment Management Co., talks about the June payrolls report, the global economy and investment strategy. Kashkari speaks with Erik Schatzker and Scarlet Fu on Bloomberg Television's "Market Makers." (Source: Bloomberg)

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July 6 (Bloomberg) -- Matthew Ferguson, chief executive officer of Careerbuilder.com, talks about results of a survey on the outlook for hiring and the U.S. labor market. Ferguson speaks with Betty Liu on Bloomberg Television's "In the Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, talks about the June U.S. employment report. Payrolls rose 80,000 last month after a 77,000 increase in May, Labor Department figures showed in Washington. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. (Source: Bloomberg)

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The 80,000 gain in employment followed a 77,000 increase in May, Labor Department figures showed today in Washington. Economists projected a 100,000 rise, according to the median estimate in a Bloomberg News survey. Growth in private payrolls was the weakest in 10 months.

Stocks fell on concern hiring has shifted into a lower gear, restricting consumer spending and leaving the economy more vulnerable to a global slowdown. The figures underscore concern among some Federal Reserve policy makers that growth isn’t fast enough to lower unemployment stuck above 8 percent since February 2009.

“The job market is soft,” said David Resler, chief economic adviser at Nomura Securities International Inc., who correctly forecast the payrolls gain. “I’d characterize our reaction as much the same way the Fed will react -- not surprised but disappointed. It’s just not the kind of growth we need to see at this stage in the business cycle.”

The Standard & Poor’s 500 Index dropped 0.9 percent to 1,354.68 at the close in New York. The yield on the benchmark 10-year Treasury note declined to 1.55 percent from 1.60 percent late yesterday.

Private Employment

“What we are seeing today from an income perspective is our economy is modestly adding jobs,” Robert Hull, chief financial officer at Lowe’s Cos., the second-largest U.S. home- improvement retailer, said at a June 26 consumer conference in Boston. “That’s the good news. The bad news is it’s not sufficient to have a material impact on the unemployment rate.”

Private payrolls increased 84,000 in June after a revised gain of 105,000 that was larger than initially reported. They were projected to advance by 106,000 in June, the survey showed. Last month’s change in private payrolls reflected a 2,000 increase in education and health services that was the smallest in almost two years.

At the same time, an increase in hours worked along with a pickup in wages last month indicate demand may hold up and keep the economy expanding. While companies may put off adding more workers to payrolls because of Europe’s debt crisis, gains in spending may be prompting them to ask their employees to put in a longer workweek.

The unemployment rate, derived from a separate survey of households, was forecast to hold at 8.2 percent, according to the Bloomberg survey median.

Underemployment Rate

The so-called underemployment rate -- which includes part- time workers who’d prefer a full-time position and people who want work but have given up looking -- increased to 14.9 percent from 14.8 percent.

Among those having trouble finding full-time work is Dave Marshall of Tampa, Florida. The 23-year-old Army reservist, who works part time for two security firms in the area, said he has been unable to find a job that utilizes his degree in sociology from the University of Florida in Gainesville.

“I am getting edged out by people with experience,” Marshall said. “There have been some entry-level positions that I have applied for, but the economy is so bad that the people who have been let go are also applying for entry-level positions and a lot of them have two, three years of experience.”

Nicole Sandler, 52, lost her job at Air America in January 2010 when the radio station closed. She was ineligible for unemployment benefits because she was a contractor.

Temporary Jobs

Sandler moved in with her fiance in Coral Springs, Florida, in April 2011 when she lost her house in Miami. She gets about $1,000 a month from a webcast she puts together five nights a week and takes temporary radio jobs when she can get them.

“I work but I’m still technically unemployed,” said Sandler. “I guess I could try to find a job doing something else, but at 52 to take an entry-level job I may as well do what I’m doing. What am I going to do, work in a supermarket?”

Today’s report deprived President Barack Obama of progress on voters’ overriding concern with just four months before the election.

Obama, speaking at a campaign stop in Poland, Ohio, called the addition of new jobs “a step in the right direction” though the economy has to grow “even faster.”

Republican presidential candidate Mitt Romney called the report “another kick in the gut.”

‘Stand Up’

“The president’s policies have not gotten America working again, and the president is going to have to stand up and take responsibility for it,” Romney said at a hardware store in Wolfeboro, New Hampshire, where he’s vacationing this week.

While Romney has suggested that Obama has done a worse job managing the economy than President Jimmy Carter, investors have given the U.S. a vote of confidence.

The S&P 500 surged 70 percent under Obama through yesterday, more than three times the 19 percent increase during Carter’s first 3-1/2 years in office starting in 1977.

Although unemployment is higher than the 7.5 percent level in May 1980, inflation is lower. Consumer prices rose 1.7 in May from a year earlier, compared with a 14.4 percent increase in May 1980.

Still, joblessness has exceeded 8 percent since February 2009, the longest such stretch since monthly records began in 1948.

Only one president since World War II, Ronald Reagan, has stayed in office with a jobless rate above 6 percent. Reagan won a second term in 1984 with 7.2 percent unemployment in the month of the election; the rate had fallen almost three percentage points in the previous 18 months.

Staples Inc.

Companies like Staples Inc. aren’t anticipating lower jobless rates anytime soon.

“I don’t think we’re waiting around and holding our breath for that in the retail space,” Michael Miles, chief operating officer at the Framingham, Massachusetts-based office-supply retailer, said at a June 27 investor conference.

Today’s report showed employment at service providers increased 67,000 in June after a 98,000 gain, today’s report showed. Construction companies added 2,000 workers, while retailers cut 5,400 jobs.

Uncertainty about the U.S. government’s fiscal outlook may still be hampering hiring plans. Congress has yet to resolve the so-called fiscal cliff, which represents more than $600 billion in higher taxes and reductions in defense and other government programs in 2013 that will take place without action.

European Unemployment

Across the Atlantic, joblessness in the 17-nation euro area rose to 11.1 percent in May, the highest in records that begin in 1995, from 11 percent a month earlier, data showed this week.

“It is pretty clear that a lot of what is slowing the economy down are fears of financial catastrophe and what’s going on in Europe,” Austan Goolsbee, former chairman of the White House Council of Economic Advisers under Obama, said on Bloomberg Television.

Today’s report showed factory payrolls in the U.S. increased by 11,000, more than the survey forecast of a 7,000 increase and following a 9,000 increase in the previous month. Government payrolls decreased by 4,000.

Manufacturing is getting a boost from rising demand for new cars. Auto sales accelerated to a 14.1 million seasonally adjusted annualized rate in June, according to researcher Autodata Corp., completing the best first half since 2008.

New Models

“We’re seeing strong demand for our current products as well as our new models,” Bill Krueger, vice chairman of the Americas for Nissan Motor Co., said today in a telephone interview. He said the company will add a shift to its Tennessee plant to meet demand.

In a bright spot for American workers, average hourly earnings rose to $23.50 from $23.44 in the prior month, today’s report showed. The average work week climbed six minutes to 34.5 hours.

The number of temporary workers increased 25,200 in June after an 18,600 rise.

At the Fed, the slowdown in both economic and employment growth prompted officials to take additional steps to stimulate the expansion. The Federal Open Market Committee on June 20 extended Operation Twist to the end of the year. The program aims to push down long-term borrowing costs on everything from mortgages to car loans by extending the maturity of assets on the Fed’s balance sheet.

Concern Expressed

“This is going to be read as in line with the concern that they expressed about the labor market,” said Roberto Perli, managing director of policy research at International Strategy & Investment Group in Washington, who formerly worked in the Fed’s Division of Monetary Affairs. “It probably doesn’t contain any incremental information that leads them to believe that the situation is worse than they thought.”

At an April 25 press conference, Fed Chairman Ben S. Bernanke said job growth of about 100,000 a month is needed to keep the jobless rate stable, and increases of 150,000 to 200,000 are needed to reduce it.

Policy makers last month also downgraded their outlook for jobs and growth, saying they anticipate the unemployment rate will average 8 percent to 8.2 percent in the fourth quarter of this year versus an April estimate of 7.8 percent to 8 percent.

To contact the reporter on this story: Alex Kowalski in Washington at akowalski13@bloomberg.net

To contact the editor responsible for this story: Christopher Wellisz at cwellisz@bloomberg.net

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U.S. Stocks Retreat as Jobs Growth Trails Forecasts

By Lu Wang and Julia Leite - Jul 7, 2012 3:46 AM GMT+0700

U.S. stocks declined, erasing a weekly gain for the Standard & Poor’s 500 Index, as slower-than- forecast growth in payrolls fueled concern that the economic recovery is slowing.

All 10 industry groups in the S&P 500 retreated. Alcoa Inc. (AA), Freeport-McMoRan Copper & Gold Inc. (FCX) and Schlumberger Ltd. (SLB) slid at least 1.3 percent as commodity shares declined. JPMorgan Chase & Co. (JPM) and Bank of America Corp. (BAC) dropped at least 1.4 percent to pace losses among financial companies. Computer and software shares slumped after Informatica Corp. and Seagate Technology Plc (STX) said earnings missed their forecasts.

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Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months. Photographer: Richard Drew/AP Photo

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July 6 (Bloomberg) -- Michael Woolfolk, managing director at Bank of New York Mellon Corp., and Kathy Boyle, president and founder of Chapin Hill Advisors, talk about the outlook for stocks, Federal Reserve monetary policy and the U.S. dollar. They speak with Adam Johnson and Alix Steel on Bloomberg Television's "Street Smart." Jason Schenker of Prestige Economics LLC also speaks. (Source: Bloomberg)

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July 6 (Bloomberg) -- Jason Brady, a managing director at Thornburg Investment Management, and Bob Iaccino, founder and president of TraderOutlook.com, talk about investment strategy and the outlook for financial markets. They speak with Scarlet Fu and Adam Johnson on Bloomberg Television’s “Lunch Money." (Source: Bloomberg)

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July 6 (Bloomberg) -- Bloomberg's Dominic Chu reports on the market reaction to the June employment report. Payrolls rose 80,000 last month after a 77,000 increase in May, the Labor Department reported today. He speaks on Bloomberg Television's "In The Loop." (Source: Bloomberg)

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July 6 (Bloomberg) -- Trevor Greetham, director of asset allocation at Fidelity Worldwide Investment, talks about investment strategy, monetary stimulus and the U.S. economy. He speaks with Guy Johnson on Bloomberg Television's "The Pulse." (Source: Bloomberg)

The S&P 500 slipped 0.9 percent to 1,354.68 at 4 p.m. in New York, reversing its gain for the week to a loss of 0.6 percent. The Dow Jones Industrial Average dropped 124.20 points, or 1 percent, to 12,772.47. Volume for exchange-listed stocks in the U.S. was 5.1 billion shares, 25 percent below the three- month average and the second-slowest full trading day of 2012.

“It confirms the view that the U.S. economy is slowing,” said Jack Ablin, chief investment officer of BMO Harris Private Bank in Chicago, which oversees about $60 billion of assets. “We are creating jobs at about less than half the pace in the second quarter than we did in the first quarter, either because of influences from abroad or seasonal adjustments.”

Equities fell as Labor Department figures showed payrolls rose 80,000 last month after a 77,000 increase in May. Economists projected a 100,000 gain, according to the median estimate in a Bloomberg News survey. The unemployment rate held at 8.2 percent. Private employment, which excludes government agencies, increased 84,000 in June, the weakest in 10 months.

‘Disappointing Report’

“On balance it’s a mildly disappointing report,” Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion, said in a phone interview. “It’s hard for investors to get overly enthused about it unless in this bizarre world you believe this number gives the Fed more impetus to step up with QE3,” he said, referring to another round of stimulus action by the Federal Reserve.

The Fed has already purchased $2.3 trillion of securities in two so-called quantitative-easing programs. Chairman Ben S. Bernanke, speaking at a June 20 Washington press conference, said the Fed is focusing “primarily” on the outlook for jobs in deciding whether to ease further, and more action would be needed without “sustained improvement in the labor market.”

U.S. stocks declined yesterday, halting a three-day advance for the S&P 500, amid disappointment over Europe’s efforts to tame the region’s debt crisis. The European Central Bank reduced its benchmark rate to a record low of 0.75 percent and the People’s Bank of China cut borrowing costs for a second time in a month.

Commodities Tumble

Commodity shares in the S&P 500 slumped 1.2 percent as a group today. The S&P GSCI Index of commodities lost 2.4 percent as oil and gold prices declined. Alcoa, the largest U.S. aluminum producer, tumbled 2.2 percent to $8.73. Freeport- McMoRan, a copper and gold company, fell 1.3 percent to $35.01 while oilfield services company Schlumberger slid 1.4 percent to $65.17.

The Morgan Stanley Cyclical Index (CYC) of companies most-tied to economic growth erased 1.3 percent. The Dow Jones Transportation Average slumped 1 percent. JPMorgan slipped 1.4 percent to $33.90 while Bank of America lost 2.1 percent to $7.66.

Technology Slump

Technology shares dropped the most among S&P 500 groups, erasing 1.8 percent. Informatica (INFA) plunged 28 percent to $31.39, the biggest loss since 2001. The provider of corporate data- integration software reported second-quarter earnings and revenue that unexpectedly dropped, missing analysts’ estimates. Informatica said it didn’t adapt as rapidly as it should have to a downturn in demand, especially in Europe.

Other software companies tumbled. Teradata Corp. (TDC) fell the most in the S&P 500, sinking 10 percent to $65.01, while Citrix Systems Inc. (CTXS) had the second-biggest drop, tumbling 7.6 percent to $77.45.

Seagate declined 0.5 percent to $24.96. The world’s largest maker of computer disk drives said fiscal fourth-quarter sales and profit margin would miss the company’s previous forecast, citing reduced hard-drive shipments and a “supplier quality issue” that affected some products.

Acme Packet Inc. (APKT) slumped 14 percent to $15.74. The maker of devices that help transmit voice and data over Internet networks said second-quarter earnings missed its expectation because of continued weakness in the North American service provider market. F5 Networks Inc. (FFIV), a developer of software for Internet traffic management, dropped 6.9 percent to $94.49.

Airlines Gain

Navistar International Corp. (NAV) fell 15 percent to $24.42. The maker of International brand trucks said it expects additional costs to introduce an engine that will meet U.S. emission standards after its earlier technology failed to comply.

Airlines advanced as a drop in oil spurred expectations that fuel costs will fall. Southwest Airlines Co. (LUV) gained 1.3 percent to $9.27 while Delta Air Lines Inc. rose 3.5 percent to $11.

The government’s previous employment report on June 1 showed the weakest jobs growth in a year, and sent the S&P 500 down 2.5 percent for its biggest drop of 2012. Ten-year Treasury yields reached a record low of 1.4387 percent that day. The S&P 500 has rallied 6 percent since then.

Earnings Season

The rebound in equities came after a 9.9 percent tumble from a four-year high in April dragged the S&P 500 to 12.9 times reported earnings, the cheapest level since November. Alcoa is scheduled to unofficially start the second-quarter earnings season when it releases results on July 9.

Analyst estimates compiled by Bloomberg project a 1.8 percent decline in profits for S&P 500 companies in the April- June period, which would mark the first year-over-year decrease since 2009, even as revenue increased 2.5 percent. Analysts still predict profit growth of 7.2 percent for the full year.

Slower-than-forecast growth in employment means labor costs won’t be a threat to corporate profits, according to Neel Kashkari, head of global equities at Pacific Investment Management Co.

“Corporate taxes are not going to go up, cost of labor is going to stay low,” he said in an interview on Bloomberg Television’s “Market Makers” program today. “Corporate profits can continue to stay strong in the short term.”

Pimco is being very selective when it comes to which stocks to buy and is focusing on companies that should be more resilient in the face of a global economic slowdown, Kashkari said. He cited companies such as Wal-Mart Stores Inc. (WMT), the world’s largest retailer, low-fare carrier Spirit Airlines (BUSAIRL) Inc. and drugmaker Merck & Co.

Largest Fund

“There are individual names that should do well in this environment,” he said. The Newport Beach, California-based firm’s Pimco Total Return Fund is the world’s largest mutual fund.

The risk of economic shocks from Europe’s debt crisis and slowing growth in China create a flight to high-quality global companies, Kashkari said. Investors should stop holding cash and come back to the market before inflation accelerates as a result of central bank policies meant to stimulate growth, he said.

“Investors are waiting on volatility, but earnings will decay as prices around the economy rise,” he said. “Sitting in cash is not a good option.”

To contact the reporters on this story: Lu Wang in New York at lwang8@bloomberg.net; Julia Leite in New York at jleite3@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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Amazon Said to Plan Smartphone to Vie With Apple IPhone

By Tim Culpan, Olga Kharif and Ashlee Vance - Jul 7, 2012 3:30 AM GMT+0700

Amazon.com Inc. (AMZN) is developing a smartphone that would vie with Apple Inc. (AAPL)’s iPhone and handheld devices that run Google Inc. (GOOG)’s Android operating system, two people with knowledge of the matter said.

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Seattle-based Amazon considered buying wireless patents from InterDigital Inc. before the King of Prussia, Pennsylvania- based company said in June that it will sell the assets to Intel Corp. for $375 million. Photographer: Chris Ratcliffe/Bloomberg

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July 6 (Bloomberg) -- Victor Anthony, an analyst at Topeka Capital Markets Inc., talks about a possible Amazon.com Inc. smartphone. Amazon.com is developing a device that would vie with Apple Inc.'s iPhone and handheld devices that run Google Inc.'s Android operation system, two people with knowledge of the matter said. Anthony speaks with Emily Chang on Bloomberg Television's "Bloomberg West." (Source: Bloomberg)

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A smartphone would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. Photographer: Chris Ratcliffe/Bloomberg

Foxconn International Holdings Ltd. (2038), the Chinese mobile- phone maker, is working with Amazon on the device, said one of the people, who asked not to be identified because the plans are private. Amazon is seeking to complement the smartphone strategy by acquiring patents that cover wireless technology and would help it defend against allegations of infringement, other people with knowledge of the matter said.

A smartphone would give Amazon a wider range of low-priced hardware devices that bolster its strategy of making money from digital books, songs and movies. It would help Chief Executive Officer Jeff Bezos -- who made a foray into tablets with the Kindle Fire -- carve out a slice of the market for advanced wireless handsets. Manufacturers led by Samsung Electronics Co. and Apple shipped 398.4 million smartphones and other mobile devices in the first quarter, according to researcher IDC.

Drew Herdener, a spokesman for Amazon, declined to comment.

Mark Mahaney, an analyst at Citigroup Inc., said in November that Amazon is planning to release a smartphone.

Seattle-based Amazon considered buying wireless patents from InterDigital Inc. before the King of Prussia, Pennsylvania- based company said in June that it will sell the assets to Intel Corp. for $375 million, two people said. Amazon is taking pitches and setting up briefings with other sellers, the people said.

Patent Protection

Amazon slipped less than 1 percent to $225.05 at the close in New York. Foxconn gained 3.7 percent in Hong Kong.

Amazon beefed up its patent prowess recently by hiring Matt Gordon, formerly senior director of acquisitions at Intellectual Ventures Management LLC, the company that was founded by former Microsoft Corp. Chief Technology Officer Nathan Myhrvold and owns more than 35,000 intellectual property assets. Gordon will be general manager for patent acquisitions and investments at Amazon, according to his profile on LinkedIn.

Adding patents would help Amazon protect itself against lawsuits alleging illegal use of technology. Amazon has been involved in five patent-related cases this year, and 20 cases last year, according to data compiled by Bloomberg.

Demand for mobile patents has increased, as shown recently by Google’s $12.5 billion acquisition of Motorola Mobility Holdings Inc. and its thousands of patents, which closed this year.

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Olga Kharif in Portland at okharif@bloomberg.net; Ashlee Vance in San Francisco at avance3@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net

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JPMorgan, Goldman Shut Europe Money Funds After ECB Cut

By Dawn Kopecki and Charles Stein - Jul 7, 2012 12:38 AM GMT+0700

JPMorgan Chase & Co. (JPM), Goldman Sachs Group Inc. and BlackRock Inc. (BLK) closed European money market funds to new investments after the European Central Bank lowered deposit rates to zero.

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July 5 (Bloomberg) -- European Central Bank President Mario Draghi talks about the ECB's decision to cut its benchmark interest rate by 25 basis points to 0.75 percent and inflation expectations. Draghi, speaking in Frankfurt at his monthly news conference, also discusses the outlook for the euro-area economy and bank supervision. (Excerpts. Source: Bloomberg)

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Goldman Sachs Group Inc. headquarters in New York. Photographer: Jin Lee/Bloomberg

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The funds affected are JPMorgan’s Euro Liquidity Fund, Euro Government Liquidity Fund, Euro Money Market Fund, Euro Liquid Market Fund and JPMorgan Series II Funds -- EUR. Photographer: Simon Dawson/Bloomberg

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The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero, with President Mario Draghi saying the cuts may have only a “muted” economic impact. Photographer: Hannelore Foerster/Bloomberg

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JPMorgan, the world’s biggest provider of money-market funds, won’t accept new cash in five euro-denominated money- market and liquidity funds because the rate cut may result in losses for investors, the company said in a notice to shareholders. Goldman Sachs won’t accept new money in its GS Euro Government Liquid Reserves Fund, and BlackRock, the world’s largest asset manager, is restricting deposits in two European funds.

“The European market environment is in unchartered territory with such historically low -- or even negative -- yields for high-quality issuance,” Goldman Sachs (GS) said in a memo to fund shareholders, citing the ECB’s rate cut. “It is not currently feasible for our portfolio managers to deploy capital without substantially diluting the yield for the existing base of shareholders.”

The ECB yesterday reduced its benchmark rate to a record low of 0.75 percent and took its deposit rate to zero. Money funds have been struggling to invest client assets at a profit as interest rates globally are near record lows and Europe’s sovereign debt crisis has reduced the supply of available debt. Managers have been forced to cut fees to keep customer returns above zero, and some have abandoned the business.

All three firms said the restrictions are temporary and they will monitor market conditions. Investor redemptions from the funds are not being limited.

‘Negative Territory’

JPMorgan’s five closed funds had 23.7 billion euros ($29.2 billion) in assets as of July 5, the bank said in an e-mail, about 22 percent of all euro-denominated money funds. The funds are JPMorgan’s Euro Liquidity Fund (JPMEULC), Euro Government Liquidity Fund, Euro Money Market Fund, Euro Liquid Market Fund and JPMorgan Series II Funds -- EUR.

The deposit rate cut “will almost certainly move cash bids in short-dated instruments into negative territory, and so we have taken the step to restrict subscriptions and switches into the funds in order to protect existing shareholders from yield dilution,” JPMorgan said on its website.

The company had $417 billion in money fund assets as of May 31, making it the world leader, according to Crane Data LLC, a research firm based in Westborough, Massachusetts. The entire euro-denominated money fund industry has about 108 billion euros, Crane Data’s statistics show.

BlackRock’s Funds

No other global liquidity funds are at risk of being closed, “but we will not hesitate to restrict investments if we feel the market environment warrants such action in order to protect the interests of existing shareholders,” JPMorgan said on its website.

BlackRock is restricting subscriptions into two funds in its Institutional Cash Series, the Institutional Euro Liquidity Fund and the Institutional Euro Government Liquidity Fund, Jessica Greaney, a spokeswoman for the firm, said in an e-mail.

“We’re continuing to monitor the situation and evaluate options that are consistent with the best interest of fund shareholders,” Greaney said.

$2.5 Trillion

Vanguard Group Inc., the world’s largest mutual-fund firm, closed two money funds in 2009 and the funds have remained closed, spokesman John Woerth said in an e-mail. The two funds, Vanguard Admiral Treasury Money Market Fund and the Vanguard Federal Money Market Fund, have about $18 billion in assets, according to data compiled by Bloomberg.

The Valley Forge, Pennsylvania-based firm said at the time of the closing that the action was taken to protect existing shareholders. Vanguard has $1.8 trillion in U.S. mutual fund assets.

Fidelity Investments, based in Boston, restricted investments in four of its money market funds in December 2008. The funds were reopened in July 2010, spokesman Adam Banker said in an e-mail.

“We took those measures because we believed they were in the interests of the funds’ shareholders at the time,” Banker wrote. Boston-based Fidelity had $403 billion in money fund assets of May 31, according to Crane Data.

The $2.5 trillion U.S. money fund industry has been wrestling with the impact of low interest rates since the Federal Reserve cut rates to near zero in December 2008.

Industrywide revenue fell from about $12.5 billion in 2008 to $4.7 billion in 2012, according to Crane Data. Yields that reached 5 percent in 2007 today average about 0.06 percent, President Peter Crane, said in a telephone interview.

“Investors have lost hundreds of billions of dollars of interest income,” Crane said. While industry profits have been squeezed, very few major players have left the business, Crane said.

To contact the reporters on this story: Dawn Kopecki in New York at dkopecki@bloomberg.net; Charles Stein in Boston at cstein4@bloomberg.net

To contact the editors responsible for this story: David Scheer at dscheer@bloomberg.net; Christian Baumgaertel at cbaumgaertel@bloomberg.net

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