Market Report / TA-25 drops 1.4% to close below 1,000 points

The blue-chip TA-25 index closed below 1,000 points yesterday as Tel Aviv shares were down across the board. The TA-25 lost 1.4% to close at 992 points and the broader TA-100 fell 1.7% to end the day at 925 points. The Banks-5 index lost 2.4% and the Real Estate-15 was off 3.8%. Turnover was NIS 2.15 billion.

"The stock market has been in a correction trend for a few days. Investors fear that the stock market has gotten significantly ahead of the real numbers," said Yuval Ben Ze'ev, the head of the research department at Clal Finance. "The stock market is racing ahead too fast, and the negative numbers coming in from around the world have led to the current weakness," he added.

"The drop in bank shares is partly noticeable over the past week, during which these shares dropped about 10%. Investors felt uncomfortable with the ratio of book to market value at 1, while the risks still exist. In my opinion, this is a good opportunity to get in, stocks are cheap and the third quarter [financial] reports will renew faith in the sector."

The dollar strengthened in world markets yesterday and local investors followed the global trend: The dollar rose 0.8% against the shekel to a representative rate of NIS 3.806. This is the first time since September the greenback has risen above NIS 3.8.

Around the globe, the euro rose against the dollar as investors bet that the European Central Bank will hold its main interest rate steady at 1% later this week.

The 16-nation euro bought $1.4800 in morning trade, up from the $1.4753 in late New York trading Monday. Only a week ago the dollar was at $1.5 per euro. Investors expect the ECB to hold its main interest rate steady when it meets tomorrow. Though at historic lows, the ECB's rate is higher than that of the Bank of England and the U.S. Federal Reserve.

Higher interest rates can support the euro as investors move funds to that currency and earn better returns than with the pound or dollar .

The shekel inched up against the euro yesterday by 0.02% to a representative rate of NIS 5.579.

European shares hit a one-month closing low as the markets started the day sharply lower; carmakers, banks and basic materials all fell strongly. Most of the declines came early in European trading when BMW's earnings disappointed and after it was announced that two large banks, RBS and Lloyds, would receive a second bailout, worth $54 billion. Lloyds and RBS were the most active shares in Europe, easily surpassing the average of the last few weeks of trading.

Asian markets were also down as investors awaited policy announcements from key central banks this week for clues on the timing of eventual policy shifts.

The FTSEurofirst 300 index of top European shares ended down 1% at its lowest close since early October. The index, which slumped 45% last year, is still up 16% in 2009 and has surged 50% since its record low in early March.

Teva eased 0.5% despite reporting good third-quarter results. (See story on Page 8.)

Perrigo fell 2% even though its third-quarter figures surpassed analysts' expectations.

Israel Discount Bank lost 0.9% as chairman Shlomo Zohar convened a board meeting yesterday to report on the attempts to oust him. (See story on Page 12.) He said he planned to remain in his post through the end of his contract in early 2011.

Other noteworthy financial stocks yesterday included Menora Mivtachim, which tumbled 6.5%, Bank Leumi, which fell 2.6%, Migdal Insurance, which was off 3.8%, Clal Insurance, which dropped 3.9% and Mizrahi-Tefahot Bank, which fell 3.4%.

The Israel Corporation lost 2.9% ahead of yesterday evening's shareholder meeting to approve a cash injection for its Zim shipping subsidiary. The motion passed, with changes. Israel Chemicals shares lost 2.2%.

Ben Ze'ev also commented on the shares of the Israel Corporation and Africa Israel. "There is a lot of noise being made over the agreement on Zim. As of now it seems the agreement will not be approved and changes will be made to it. This adds to the feeling of uncertainty in the market," he said.

"Africa Israel exudes a feeling of manic depression over the chances of an agreement. There is much criticism over the lack of sanctions if the money [from Lev Leviev] does not arrive later. There is a feeling among investors that the agreement is further away than what seemed likely on Friday morning. Africa shares are falling hard and pulling down real estate shares with it."

Ben Ze'ev was right: The stock tumbled 7.1%. Investors continued to show lots of interest in the share as speculation increases on whether the debt-restructuring agreement reached last Friday with bondholders will hold water. On Sunday, Africa shares and bonds rose strongly, but on Monday and yesterday they fell sharply. Africa bonds were down between 0.2% and 2.5% yesterday.

Other real estate shares that fell were Gazit Globe, down 4.9%, Jerusalem Economic Corporation, down 5.5%, and Elbit Medical Imaging, off 4.4%. Africa Israel Properties dropped 6%.

Tal Levy and news agencies contributed to this report.