Tel Aviv stocks rebounded firmly yesterday after Sunday's steep drop in reaction to the U.S. losing its perfect credit rating, in sharp contrast to markets around the world.
Wall Street opened with losses and oil fell hard after almost all trading sessions in Europe and Asia ended deep in the red.
Before yesterday's rally, Israeli share prices had dropped 7% to 9.5% on Sunday but the European reaction yesterday - the first day those markets were open since the announcement - was a little more muted. London's broad index, the FTSE-250, fell nearly 4% and French stocks and German shares lost 5%.
The European markets' reaction to the U.S. downgrade by Standard & Poor's had been offset by a European Central Bank move to buy Spanish and Italian bonds to halt contagion from the euro zone debt crisis.
But there is no question that jitters abound. Oil dropped 3% on Monday, crashing below technical support levels as the reduction of the U.S. credit rating, from a perfect AAA to a still-powerful AA +, hammered equities. Brent crude fell $3.49 to $105.88 a barrel, Reuters reported.
On the other hand, U.S. Treasuries jumped like rabbits yesterday. Perhaps ironically, investors chose the liquidity and perceived safety of U.S. government bonds due to uncertainty about what the downgrade meant for stocks and other kinds of assets that rely on economic growth.
In Tel Aviv, however, the indexes were green almost across the board yesterday. The benchmark TA-25 index gained 1.5% to 1,090 points, the broader TA-100 index also advanced 1.5% to 987 points and the index tracking bank stocks gained 3%. On Sunday the banks had lost around 9%.
Bank Hapoalim shares gained 5% and Teva Pharmaceutical Industries rebounded 1.7% on the day's highest turnover, of NIS 160 million.
Total turnover was heavy again at NIS 2.2 billion, though not as heavy as on Sunday, when the volume of trade reached NIS 2.6 billion.
"Investors panicked and overshot yesterday," said Ido Amarilio, head of the stocks trading desk at Psagot. Yesterday they discovered that the market had already anticipated the bad news - after all, S&P hadn't been coy about its intention to downgrade the U.S. On Sunday there were some buyers and by yesterday, they'd gained more confidence, he explained.
However, the gains were not due to all the people standing by their stock exchange. Market sources whisper that redemptions from mutual funds had reached a billion shekels by mid-day, and a close look at the benchmarks shows highly selective trading. Among the 25 large-caps on the TA-25, for instance, some gained and some lost, and both were rather extreme. Among the losers were oil and gas exploration company Avner, with a drop of 1.2%; its sister company Delek Drilling, which lost 2.6%; both companies' parent company, Delek Group, which fell 3.5%; and Cellcom, which fell 2.4% after filing a weak report for the second quarter of 2011. From its peak in April, Delek Group stock has lost 32% of its value.
Also among the losers was Discount Investment, which dropped 4.4%. It had fallen 17.5% on Sunday after announcing an emergency loan to subsidiary Koor Industries, to help it stave off any putative attempt by creditor banks to take away its Credit Suisse shares, if the share price of the Swiss bank falls much further. (See story, Page 8. )
Cellcom fell 2.4%.
Ormat Industries shares were among the day's gainers, rising 1.5% after the company delivered its quarterly results. Ormat reported netting $7.6 million in the second quarter of 2011 compared with losing $2.7 million in the same period of 2010. Revenues at the geothermal energies holding company, which controls Ormat Technologies, grew 10% year over year to $106 million. With reporting by Reuters.
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