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The sharp rises on global markets this weekend had their impact on the local bourse, as did the upcoming arrival of U.S. envoy Anthony Zinni. The Maof, which started with a 0.5 percent jump, continued climbing and at noon was up 1.3 percent at 417 points; even the steep fall suffered by Teva was unable to slow down the upward trend.

Teva Pharmaceutical Industries' slide on the NYSE created a negative 3.2 percent arbitrage gap. In Friday, Teva fell 2.8 percent, completing a plunge of almost 13 percent over the last two months. Volume was high, at around $135 million. In Tel Aviv, Teva started almost three percent down, and closed 2.5 percent down on NIS 35 million volume.

The opening shot for Teva's freefall this weekend was when the U.S. Food and Drug Administration (FDA) approved Serono's Rebif, which competes with Teva's Copaxone, for the treatment of relapsing forms of multiple sclerosis - a chronic, often disabling disease of the central nervous system.

Serono sells Rebif in more than 70 countries and controls about 40 percent of the sales of drugs for multiple sclerosis outside the U.S. Rebif's entry into the U.S. market, which is valued at $1.3 billion, will probably cut the sales of its competitors, Teva and Biogen. Teva's Copaxone sales in 2001 were $360 million, with 80 percent generated in North America.

Rises on the European bourses were more moderate than in the U.S., but in all, the positive news from abroad pushed the Maof up 1.1 percent yesterday. The Tel Aviv 75 went up 1 percent. Trading volume was NIS 218 million.

Even Moody's rating slash for Israel's leading banks did not unnerve traders. Bank Hapoalim gained a moderate 0.1 percent, but United Mizrahi Bank leapt 1.3 percent, and Leumi gained 0.6 percent.

Forex keeps its cool

The foreign currency market - and in fact all financial markets in Israel - were overwhelmed by recent events, but surprisingly remained quite stable. Options on the dollar left the dollar at 4.67 shekels, almost unchanged compared to Friday's rate.

Apparently, where business is concerned, currency traders are a cynical and sensible bunch. Traders chose to focus on the prospects of an upcoming calm period: Zinni's expected arrival, Prime Minister Ariel Sharon's giving up the condition of seven days of quiet, and even the announcement made by Palestinian Authority Chairman Yasser Arafat of the arrest of the leader of the terrorist squad that assassinated Minister Rehavam Ze'evi. Currency traders concluded that even a mildly calmer situation could push the shekel up.

But then came Finance Minister Silvan Shalom and crushed this unexpected cautious optimism with an even more powerful bomb than the ones in Netanya and Jerusalem: a bill proposing that a council of governors be appointed to run the Bank of Israel.

The dollar did not cross the 4.7 shekel mark in the last few days only because the Governor of the Bank of Israel has expressly threatened to raise nominal interest if the dollar jumps the 4.75 shekel benchmark too soon.

A council of governors, they say in the currency market, is designed primarily to stop the governor from hiking the interest rate. Thus, the following equation emerges: The more realistic the option of a council of governors becomes, the more the shekel will be devalued.

Currency traders are generally opposed to the concept of a council of governors. Most of them see it as a move that is meant to wipe out the Bank of Israel, which even today is perceived as the last stronghold of professionalism and reliability in the economic realm of Israel's government.

The dollar's stability yesterday indicates also that the currency market does not believe Shalom will be able to implement this plan. "He may be trying to pressure Klein," one trader said, "but at the end of the day, it's hard to believe that Sharon, who listens mainly to former governor Jacob Frenkel, will ever agree to implement such a move."