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Tel Aviv stocks sustained losses throughout the trading session yesterday and closed about a half-percent lower. Share prices spent the day hovering below the flatline, but the losses gained momentum toward closing as Wall Street opened below water.

The TA-25 index fell by 0.6 percent to 1,081 points and the TA-100 index dropped 0.5 percent to 1,059 points. The TelTech-15 index fell 0.2 percent.

Total turnover was relative low at NIS 1.24 billion.

Bonds also continued their trek south. Long-term, fixed-income Shahars dropped by 0.25 percent and long-term linked bonds lost as much as 0.13 percent. The yield to maturity on long-term Shahars is now about 5.95 percent.

The tension among Tel Aviv's players in regard to ripples from the U.S. subprime tsunami washing over Israel seems to be abating. Central banks in Europe, Asia and the U.S. Fed itself bailed out the markets by pumping in billions in cash, and the injection of liquidity seems to have had a positive effect. Investors seem more confident that while there is evidence of a credit squeeze, it falls short of a true crunch.

That said, the slightest trigger from one of the major markets could suffice to send the investment community back into panic mode, which could send the indexes sliding anew.

The day before yesterday, all Tel Aviv indexes had rallied, a bit, after words of calm from both Citi and Merrill Lynch. The analysts noted Israel's low to nonexistent actual exposure to the U.S. subprime mess, noting that Israeli institutions hadn't invested in mortgage-backed bonds.

Even though Israel's economic fundamentals seem to be firmly on track, the prevailing opinion is that the Bank of Israel will be raising interest rates for September, because of the continuing climb of consumer prices.

The July consumer price index had shocked the pundits, coming in at 0.7 percent or double the estimates, and analysts are now thinking that the CPI figures will remain high throughout October.

Onto the stocks: Shares of Makhteshim Agan Industries fell 1.3 percent even though the agrochemicals maker yesterday announced powerful results for 2006. Makhteshim Agan said that revenues climbed 20 percent to $550 million in the second quarter of '06, and that its net profit surged 30 percent to $55.4 million.

Shares of the Bezeq telecommunications company lost 0.4 percent. Provisions that the former government company had to make in the second quarter weighed heavily on its results, as Bezeq revealed yesterday. Its operating profit sank to NIS 570 million, down 13 percent from the first quarter. But its net profit increased by 25 percent against the parallel quarter in the previous year to NIS 361 million.

Cellcom shares rose 3.3 percent after it published strong results yesterday. Operating profit rose 26 percent to NIS 345 million. Arch-rival Partner Communications sank 0.4 percent.

The Banks-5 index fell by 0.9 percent as Hapoalim, the biggest bank in Israel, lost 1.6 percent of its value. Bank Leumi, the second biggest, fell 1.1 percent. Investors may have been dismayed by the profit warning that UBS of Switzerland issued yesterday.

The Real Estate-15 index retreated by 0.9 percent. Shares of Africa Israel lost 1.6 percent, bringing its slump from the start of May to a huge 37 percent.