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The bloody day suffered by the state of Israel yesterday predictably dragged down leading stocks, bonds and currency demand sharply. The renewed wave of mass terror attacks isn't encouraging for the Tel Aviv Stock Exchange so even though many players think many shares are trading at ridiculous prices, they line up on the sell side and exercise investments.

The Maof-25 blue chip index ended trade down 2.1 percent to 364 points, and the TA-100 dropped 1.8 percent. Volume was low at NIS 134 million. Falls in New York markets over the weekend did nothing to improve the general atmosphere. Wall Street's leading indices lost 5-6 percent during the last two days of last week. The Tel Tech 15 closed down 2.3 percent.

On Sundays, with no currency trade on global financial markets, shekel-dollar options trade on TASE is a reliable instrument with high tradability for predicting the dollar exchange rate and volumes of demand for the U.S. currency. This is particularly true on days when security and political events are significant for the financial markets. Many players use the options as a defense against damage stemming from inability to trade in currency on Sundays. At the end of the trading day, dollar options reflected an exchange rate of NIS 4.73 to the dollar, up 0.24 percent from Friday's representative exchange rate.

The bond market is also impacted by rapid fluctuations in currency rates. Shekel devaluation directly impacts the increase in the inflation rate. This decreases non-linked bonds' attractiveness and increases the attractiveness of buying consumer price index-linked bonds. So bond market players' responses yesterday were also largely based on the shekel-dollar options market. Fixed-interest Shahar bonds posted sharp 1.3 percent drops at the end of trade yesterday. Variable-interest Gilon bonds dropped 0.5 percent, while CPI-linked bonds gained.

With the exception of Makhteshim Agan, all the Maof shares fell yesterday, some fairly sharply. Makhteshim, which suffered a negative trend last week on the developing Brazilian financial crisis, saw a sea change in trade in the Brazilian real over the weekend. The company's projections published yesterday of $10 million more revenues in the U.S. than previously projected also boosted the share, which ended 1.5 percent into green territory.

IDB group shares posted sharp drops. Discount Investments slipped 4.5 percent on NIS 10 million turnover, and Clal Industries slid 3 percent, while IDB Development shed 2.7 percent.

Bank shares also lost value as Bank Hapoalim fell 3.1 percent, Discount Bank lost 2.4 percent and Mizrahi bade farewell to 2 percent. Bank Leumi, which lost 4 percent on Thursday on the Marani committee recommendations to sell 7 percent of the banks shares on the stock exchange, kept heading south to a 1.3 percent loss.

Due to newspaper reports that retail chains will publish poorer results in Q2 due to continuing recession and terror attacks, the companies also kept sliding yesterday. Super-Sol and Blue Square Israel each lost 2 percent.

After a hefty 13 percent rise in the past two weeks, market forces overcame drug maker Teva Pharmaceuticals (Nasdaq: TEVA) as well, with the company losing 2.5 percent yesterday on the session's largest turnover, NIS 25 million.

Among TA-100 shares, AudioCodes (Nasdaq: AUDC) fell 13.4 percent, following in Wall Street's footsteps, and Nice Systems (Nasdaq: NICE) shed 4.5 percent on a relatively high NIS 1.2 million turnover. Enthusiasm for the company's recent acquisition dissipated on doubts Thales was worth the price paid.