The Tel Aviv Stock Exchange on Wednesday seemed to be heading for another somnolent session of slight gains until the last hour of trade, when the release of better-than-expected U.S. growth figures pushed up the indexes on Ahad Ha'am Street.
The U.S. gross domestic product expanded at a 1.7% annual rate, the Commerce Department said Wednesday, beating the government's initial estimate of 1.5% growth, released last month.
The blue-chip TA-25 index closed up 1.1%, at 1,120 points, while the broader TA-100 nudged up 1%, to 995 points.
The Banks-5 index climbed 3% on the 5% surge in Bank Discount shares and on the release of results from the First International Bank of Israel, which itself gained 3.5% in value. FIBI reported net profits of NIS 143 million in the second quarter, 43% more than in the parallel quarter in 2011. Net interest income and non-financing interest income rose by 14.1%, to NIS 584 million, while the expense for credit losses fell to NIS 21 million, from NIS 36 million.
The Real Estate-15 index rose 1.3%. The oil and gas index jumped 3%, while shares of Avgol shot up 5.3% on the report of the sale of the controlling interest in the nonwoven textiles manufacturer. Shares of Tower Semiconductor rocketed by 9%. Total volume on the TASE yesterday was NIS 900 million, more than double Tuesday's turnover, boosted by the expiry today of options on the TA-25 index ("Maof options" ).
Trading this week has been affected by speculation on a possible third round of "quantitative easing" through large-scale bond purchases, nicknamed QE3, from the U.S. Federal Reserve. If that does happen, injecting massive amounts of cash into the U.S. market, stock markets are likely to rise sharply in response, perhaps even enough for a rally of a few months' duration.
Bank Mizrahi-Tefahot chief strategist Ronen Menahem weighed in yesterday on the odds of seeing QE3, opining that in the absence of other measures that are sufficiently effective and rapid, "The chance of a third bond-purchase program and/or an extension of the commitment to zero-percent interest through the end of 2015, as a means of improving household sentiment and renewing the labor market recovery has increased, in our opinion."
Traders are waiting in anticipation for the speech that Federal Reserve Chairman Ben Bernanke is scheduled to deliver tomorrow at a meeting of global central bankers in Jackson Hole, Wyoming. In 2010, he hinted at QE2 at this event. That second round of quantitative easing involved a combined $600 billion purchase of long-dated Treasury Bills from November 2010 through June 2011. "That makes Friday's speech very important," Menahem wrote yesterday.
"If that's how the stock markets are thinking then a speech that doesn't include an announcement of QE3 or clear hints that the measure will be taken in the very short term could set off steep drops that will weigh down the opening of the markets in Israel, Asia and Europe, in turn, at the start of next week," Menahem said. He noted that with the upcoming U.S. presidential election in November the window of opportunity for declaring a major stimulus to the American economy is closing.
With reporting from Reuters
