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Tel Aviv stocks ended a choppy Thursday session with losses of 1.4 percent, after losing yesterday's morning gains.

Boosted by cheer on Wall Street, the day began with gains of up to 0.8 percent. But from 2 P.M. onward, slumping European markets depressed the local trend, as did pessimistic speeches at the Caesarea economic conference in Jerusalem. Investors were not heartened by Bank of Israel Governor David Klein's speech, in which he indicated he would not lower interest rates to stop the appreciation of the shekel.

First to react were Shahar bonds, which reversed to lose ground, as investors lost hope of capital gains based on interest cuts. News of climbing unemployment in the U.S., surpassing expectations, also contributed to the negative trend.

Stocks reversed to the red some time after the bonds. Ultimately, the Maof-25 index fell 1.6 percent to 440.2 points and the broader TA-100 index dropped 1.2 percent to 453.2 points. The TelTech-15 index stayed above water, ending on a gain of 0.1 percent. Total turnover was relatively low at NIS 321 million.

The shekel gained ground against the U.S. dollar yesterday as the representative exchange rate was set at NIS 4.294, one agora lower than the previous official daily rate. This is an 18-month high, last seen a few days after Bank of Israel Governor David Klein slashed interest rates by 2 percent and the shekel began a wild ride down.

The surprise Israeli rate cut substantially reduced the gap between interest on the dollar and interest on the shekel. The local currency's strength now against the greenback also stems from that gap. Local and foreign investors are converting dollars, on which they are getting the lowest yields in decades, into shekels. They put the shekels into local deposits with relatively high interest or buy Israeli government bonds that carry 7 percent interest.

Recently, treasury officials and business leaders have tried to pressure Klein into speeding up the pace of interest rate cuts. They say that above and beyond the astronomical financing costs inherent in the current monetary regime, the strong shekel deals a body blow to exporters and slashes their profits. Those same leaders say exports are the economy's only remaining growth engine.

Koor Industries (NYSE: KOR) sank 5.7 percent after affiliated company ECI Telecom (Nasdaq: ECIL), in which Koor has a 31 percent interest, warned that its second-quarter results would fall short of expectations, due to poor performance of core units and of subsidiary ECtel (Nasdaq: ECTX).

Clal Industries and Investments (TASE: CII), which owns a 14.5 percent stake in ECI, ended the day down 4.6 percent. Clal dragged down the other IDB group stocks.

Super-Sol (NYSE, TASE: SAE) ended flat after Haaretz reported its new management means to close 15 outlets, and cut manpower by 5 percent, after the company's poor first-quarter performance.

Israel Salt Industries (TASE: SALT) lost another 7.3 percent on top of its 15.6 percent slide earlier in the week, after Haaretz reported that the Israel Lands Administration may rethink benefits granted to the company regarding lands in Eilat and Atlit. The attorney general had sharply criticized the unusual perks, saying they were unjustified.

Teva Pharmaceuticals (TASE, Nasdaq: TEVA) jumped 0.5 percent after announcing a one-time gain of $100 million, to be posted in 2003, after GlaxoSmithKline relinquished all product rights relating to leukemia treatment Purinethol in the United States, including Puerto Rico, and Canada.