Market Report / GDP Surprise at Home, Rallies Abroad Lift Stocks

TA-25 index of blue chips finishes 0.6% higher to a closing of 1,106.47 while the TA-100 adds 0.5% to 986.52.

Trading on the Tel Aviv Stock Exchange began the week with increases in response to rising markets in the United States and Europe on Friday, as well as unexpectedly strong Israeli economic growth figures the day before.

The TA-25 index of blue chips finished the session 0.6% higher to a closing of 1,106.47 while the TA-100 added 0.5% to 986.52. The TA-Banking index outpaced them both, rising 1.4% to end at 846.08 and bringing its total gains for the last two sessions to about 5.4%. The TA-Real Estate 15 index rose 1.1% to 236.79. Turnover was unusually low, with just NIS 445 million changing hands.

Global shares and the U.S. dollar advanced on Friday as apparent support from German Chancellor Angela Merkel for European Central Bank intervention to calm the euro zone's debt troubles lifted investor sentiment.

The Dow Jones industrial average and Standard & Poor's 500 Index both closed up 0.2% on Friday. In Europe, the FTSEurofirst 300 index closed up 0.5% at a 13-month high.

In Israel, the Central Bureau of Statistics reported on Thursday that gross domestic product rose at a 3.2% annual rate in the second quarter, ahead of economists' expectations and defying - for now at least - forecasts of a slowdown.

Running against the rising tide on the TASE yesterday, shares of Perrigo, the over-the-counter drug-maker, took a hit of 3.1% after turning in a fiscal fourth-quarter report that fell short of analysts' forecasts. Cellcom shares were hit by profit-taking, sending them down 4.5% yesterday following a 20% rise last week.

Bank Leumi said in its weekly market report that the TASE will display weakness in the short term because of the slowing global and domestic economies, which will be seen as companies publish their second-quarter financial statements between now and the end of the month. The public debate over attacking Iran is "raising the level of fear and casting a cloud over the market."

Leumi recommended increasing positions in domestic technology and energy shares, both of which are relatively immune from slower economic growth. It also recommends chemicals stocks, which will benefit from rising global crops prices.

Israel Chemicals rose 0.7%, leading the most active stocks on turnover of nearly NIS 54 million. The company announced over the weekend that it had named Stefan Borgas as its CEO, replacing Akiva Mozes, who is stepping down after more than 13 years.

Clal Insurance, a unit of Nochi Dankner's IDB Group, rose 3.7% after reporting that it had sold its Guard Financial Group for $221 million to Nebraska-based National Indemnity Co., a unit of Warren Buffett's Berkshire Hathaway. (See story on page 12.)

IDB Holdings, which badly needs the cash infusion to repay debt, advanced 7.3%. IDB Development, an IDB Holding unit that controls Clal Insurance, saw prices for its bonds rise 4% (Series Het, Tet and Vav ), although they still are yielding junk levels of 20% to 45%.

Reuters contributed to this report.