Stocks fell on Wednesday on the Tel Aviv Stock Exchange to their lowest level since November 2011.
The big news that put local investors in a pessimistic mood came once again from Europe - and Spain in particular.
The abrupt resignation of Bank of Spain Governor Miguel Angel Fernandez Ordonez on Tuesday, a month before his term was due to end, spooked investors all over the globe, despite gains on Wall Street the day before.
The blue chip TA-25 index lost 0.7% to close at 1,049 points, and the broader TA-100 index also fell 0.7% to end the day at 967 points.
Aside from technology stocks, all the major indexes lost ground on Wednesday, and the TA-25 was in the red all day long, with the exception of a short burst in the late afternoon.
The TA-Banks index dropped 1.7%, and the Real Estate-15 index fell 0.3%. The Oil and Gas Exploration index fell 1.3%, and the Biomed index plunged 1.7%. The BlueTech-50 index rose 0.3%, and the TA-Communications index plummetted 2.5% after a small recovery earlier in the week.
Investors wait for what will happen in Europe
Turnover was once again extremely low, as investors seem to be sitting on the fence and waiting to see what happens in Europe. Total volume was just over NIS 900 million for the day.
Large-cap corporate bond indexes fell 0.3% to 0.4%.
IDB Holding plunged 7% Wednesday and has now lost 83% of its value in the past year. The company's market cap is now about NIS 680 million. Its Discount Investment subsidiary fell 4.3% and has lost 86% of its value in a year.
Bonds of the IDB group also fell on Wednesday, with IDB Holding Series 4 bonds reaching yields of over 44%.
The Israel Corporation fell 2.3% after announcing an $82 million loss for the first quarter of 2012, a 43% increase compared to the same quarter of 2011. Shipping company Zim contributed the lion's share of the loss.
Elbit Systems lost 0.6% despite announcing a $30 million contract from the Defense Ministry.
Frutarom, a manufacturer of essences and flavorings, climbed 3.6% after releasing its first-quarter results, which showed record revenues for the quarter, of $151 million.
Dollar hits two- year high of NIS 3.88
The dollar hit its highest level in two years. The greenback rose 0.1% against the shekel on Wednesday, and the representative rate was set at NIS 3.88, a level it last saw in June 2010. The euro weakened against the local currency by 0.5%, and the representative rate was set at NIS 4.83.
The local forex market mimicked global trends as the euro neared a two-year low against the dollar, as Spain's central bank governor said the government would miss its deficit target this year. Fears of a Greek exit from the euro bloc also added to the euro's worries.
The European Commission threw Spain, the latest frontline in Europe's debt war, two potential lifelines on Wednesday, offering more time to reduce its budget deficit and direct aid from a euro zone rescue fund to recapitalize distressed banks.
Spanish government borrowing costs lurched higher, and the Madrid stock market hit a nine-year low with investors rattled by the parlous state of its banking sector fleeing to the relative haven of German bonds.
EU Economic and Monetary Affairs Commissioner Olli Rehn said Brussels was ready to give Spain an extra year until 2014 to bring its deficit down to the EU limit of 3% of gross domestic product if Madrid presents a solid two-year budget plan for 2013-14, something it has committed to do.
The concession, which Madrid has not publicly requested, was on condition that Spain effectively reins in overspending by its autonomous regions, makes further financial sector reforms and recapitalizes its troubled banks.
While the European Commission is responsible for proposing laws, it is the member states that decide whether to adopt them.
Highlighting Spain's difficulty in meeting fiscal targets while gripped by a deep recession, the outgoing central bank chief said tax revenue may fall short of government estimates and spending may be higher than expected.
He recommended bringing forward a rise in value-added tax set for 2013 if the deficit objective goes off track this year.
Reuters contributed to this report.
