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Teva Pharmaceuticals (Nasdaq: TEVA) yesterday continued to set the trend for the entire Tel Aviv Stock Exchange. Teva corrected some of the sharp drops it absorbed at the end of last week, gaining 4.8 percent on NIS 50 million turnover. Teva opened on positive arbitrage, making the gains expected.

The generic drug giant collapsed 8.2 percent Thursday on colossal volume of NIS 185 million. The company was hard hit by negative investor sentiment when Bristol-Myers Squibb (NYSE: BMY) announced it is under U.S. Securities and Exchange Commission investigation for allegedly boosting revenues by upping distributor inventories in late 2001, then publishing a profit warning in April 2002 as the unsold products sat on shelves.

In addition, Swiss Serono announced a distribution agreement for its multiple sclerosis drug Rebif with U.S. drug marketing and distribution giant Pfizer, (NYSE:PFE) which will directly compete with Teva's cash cow, Copaxone.

Following in Teva's wake, the Maof-25 blue chip index posted a 1.5-percent gain yesterday to close at 373 points, and the TA-100 closed up 1.3 percent. Teva's direct portion of the gain was 0.4 percent due to its 9.5-percent weight in the indices. Turnover on the exchange was low at NIS 166 million, with nearly one-third of all shares traded being Teva.

The positive trend on the bond market continued yesterday. Shahar fixed interest shekel bonds posted more than 1-percent gains. Turnover on government bonds was middling at NIS 650 million. Bond yields had fallen in recent weeks with prices posting relatively sharp gains. The fixed interest bonds are now trading on annual yields of more than 9 percent.

Bank shares also posted handsome gains yesterday as Bank Leumi closed up 1.7 percent, Israel Discount Bank climbed 1.75 percent and Bank Hapoalim climbed 1.05 percent on the second highest turnover on the floor, NIS 10 million.

Since the low bank shares hit with the June 20 bond market crash, the banking sector index has trekked north by 16 percent. The TA-100 has gained just 6 percent in the same period and the Maof, 7 percent.

The relatively sharp correction in bank shares is attributed to the decreased risk market players associate with the sector and the fears of a financial crisis that prevailed on the market in recent months.

The sector also benefited from lending rate hikes that increase bank margins and commission hikes that will add profits.

Interest in the bank shares also focused last week on the potential sale of Israel Discount Bank New York and the major banks' interest in buying the asset.

Nonetheless, the banks still trade in Tel Aviv at a sharp discount off equity. Bank Hapoalim trades at a p/e ratio of 0.73, Bank Leumi at 0.71, and Discount Bank at 0.5.

The insurance sector also posted gains yesterday as Clal Insurance climbed 2.4 percent and Migdal gained 2 percent. Migdal posted the gain despite Hebrew-language daily Ma'ariv reporting the company's plans to write down part of its investment in Bank Leumi.

Elco Holdings stood out yesterday with a 6.5-percent gain on a high NIS 3.6 million turnover. The company announced a buy-back offer for 1 million shares at NIS 37 per share. The purchase essentially amounts to distributing a dividend.