Market Report / TA plunges in wake of Europe, Wall St.

The Tel Aviv Stock Exchange dropped sharply in opening its trading week yesterday, following the lead of the Americans and Europeans at the end of last week. Bank shares were hit particularly hard.

The TA-25 lost 3.8% to close at 662 points and the TA-100 fell 3.9% to end the day at 602 points. Turnover was NIS 1.2 billion. Shekel-denominated government bonds fell 0.3% yesterday while inflation-linked bonds were unchanged.

Yesterday's big local economic story centered on the fight between the Finance Ministry and the Bank of Israel over Governor Stanley Fischer's plan to buy government bonds and to lower long-term interest rates. The TelBond-20 index of corporate bonds fell 1.1% yesterday, while the TelBond-40 was down 1.5%.

Also affecting local markets were expectations of today's interest announcement concerning March by Fischer, who is expected to lower rates once again - but by how much - by 0.25% or even 0.5%? Also yesterday was the first day of trading after President Shimon Peres gave Benjamin Netanyahu the task of forming the new government.

The Banks-5 fell 5.5% after the reports over the weekend of a possible nationalization of U.S. banks. Bank Leumi lost 5.3% and Bank Hapoalim was off 6.1%. Israel Discount Bank fell 5.9%.

The Real Estate-15 lost 5.6%, with Alony Hetz dropping 12.6%. Jerusalem Economic Corporation was down 6.3%, Africa Israel lost 7.2%, and Housing & Construction lost 9.2%. Gazit Globe lost 5.1% after Standard and Poor lowered the rating of its Atrium European Real Estate subsidiary (see story on page 8).

Only a week after announcing an $80 million deal, which sent its shares up hundreds of percent, Ashot Ashkelon revealed another large deal yesterday: The company said it is involved in advanced negotiations with the Defense Ministry for a NIS 90 million sale - in the first stage - of equipment for armored vehicles. Ashot said the sale could mount as high as NIS 260 million over three years. The share rose another 126% yesterday, and is now up 880% so far this year.

The chemical sector also lost ground, with Israel Chemicals losing 4.5&, despite gains for other potash producers around the world at the end of last week.