Market Report / Interest rate drop, Euro-debt fears lead to small losses
The Tel Aviv Stock Exchange followed the volatility of European markets yesterday, rising at the open, then falling into the red and recovering - twice - before ending the day slightly down. One of the factors dampening yesterday's trading was the announcement on Monday evening that the governor of the Bank of Israel, Stanley Fischer, decided to lower July interest rates by 0.25%, to 2.25%.
But the major factor affecting global markets is the fear that the European debt crisis will expand to more countries. Wall Street fell Monday to open the week on European doubts.
The blue chip TA-25 index lost 0.1% to close at 1,068 points and the broader TA-100 index also lost 0.1%, to end the day at 976 points. Almost all the major indexes closed in the red for the day, though the Biomed index rose strongly, 1.1% and the BlueTech-50 index was unchanged. The Real Estate-15 index lost 0.6% and the TA-Banks index fell 0.1%.
The TA-Communications index was once again the star, but not in the positive sense of the word. Communications shares lost another 1.6%, led down by SpaceCom, which fell 5.1%. Partner lost 2.4% and Cellcom fell 1.8%. Both of these cellular operators have been falling steadily over recent months, and Partner has now lost almost 70% of its market cap in the last year. For Cellcom, the figure is 73%.
Turnover was quite small, at only NIS 684 million, a third below even recent low averages.
Large-cap corporate bonds rose slightly the day after the interest rate announcement, with the TelBond-20, -40 and -60 rising about 0.1%. The TelBond-Shekel index rose 0.25%.
One of the most important effects of Fischer's interest rate decision will be on the capital markets and bonds. Lower interest makes capital market investments more attractive than bank deposits, and unlinked shekel-denominated Shahar government bonds rose 0.25% yesterday.
Eliezer Fishman's Jerusalem Economic Corp. dropped 5.7%, pulling down real estate shares.
The shekel fell hard against major global currencies. The dollar rose 0.6% against the shekel to a representative rate of NIS 3.939 and the euro strengthened against the local currency by 0.6%; the representative rate was set at NIS 4.918. The dollar is now at its highest level against the shekel in three years.
In global forex trading, the euro fell to its lowest in more than two weeks against the dollar as Spanish bond yields rose and hopes faded that a European summit would make progress on the region's debt crisis.
Asian markets were mixed, while European equities steadied near one-week lows, weighed down by dampened expectations of fresh crisis-fighting measures from politicians and ongoing global growth worries, but supported by cheap valuations which have begun to lure some in. Expectations of a big new initiative from the June 28-29 summit of European Union leaders have been dashed by German Chancellor Angela Merkel, who remains strongly opposed to common euro zone bonds to help share the debt burden of some of the bloc's financially vulnerable members.
Reuters contributed to this report.