Market Report / Bank of Israel Move Lifts Tel Aviv Stock Exchange

The central bank lowered its base lending rate and committed to buying foreign currency, boosting the stock and bond markets, though telecom stocks fell.

A surprise move by the Bank of Israel on Monday to tackle the shekel's strengthening by cutting its base lending rate and committing to buying foreign currency gave the stock market a strong lift.

If successful, the steps will help exporters, who have seen their competitiveness erode as the shekel appreciates against the dollar. On Monday, the central bank could chalk up a successful first day, with the dollar moving from a low for the day of NIS 3.5559 to NIS 3.6008 in the early evening. The Bank of Israel rate was set at NIS 3.5710.

The Tel Aviv Stock Exchange's benchmark TA-25 Index, which had been trending lower much of the day, took a sudden turn upward on the news and ended the session ahead 1% to 1,204.66 points. The broader TA-100 finished 0.9% higher at 1,077.02. The market was broadly higher – the exception being telecom stocks, hit by poor quarterly earnings on Monday – with turnover reaching NIS 1.27 billion.

The bond market also reacted to the central bank's announcement with sharp gains. The government's 10-year shekels bonds rose 0.27% to yield 3.51%, while 10-year bonds linked to the consumer price index rose 0.24% to lower yields to 1.44%. In the corporate bond segments, the Tel-Bond 20 index advanced 0.3%, the Tel-Bond 40 by 0.22% and the Tel-Bond 60 by 0.27%.

European shares fell from five-year highs on Monday, hit by weakness in leading banks as some investors worried that recent market gains were outstripping firms' earnings expectations. The pan-European FTSEurofirst 300 was down 0.4% at 1,228.57 points late in the morning in London after closing at a five-year high on Friday.

In New York, the Standard & Poor's 500 Indexshed 0.18% to 1,630.81, while the Nasdaq Composite Indexlost 0.0.2% to 3,435.82.

On the TASE, telecommunications stocks were turbulent, with Cellcom Israel down 2.4% and Partner Communications down 1.7%, while Bezeq jumped 4%.

Bezeq reported a smaller-than-expected decline in quarterly profit on Monday, earning a net NIS 497 million in the first quarter, down from NIS 582 million a year earlier. A Reuters poll of analysts forecast it to earn NIS 442 million.By contrast, Cellcom said on Monday that its net profit fell almost 21% from a year ago to NIS 67 million, well below the NIS 72 million analysts polled by Reuters had expected.

Israel Chemicals led the most actives on turnover of NIS 156.7 million, falling 1.7%, despite reporting on Monday that is first-quarter net profit rose 6% to $305 million on a 9% increase in revenue to $1.64 billion. The company had been forecast to earn $286 million on revenue of $1.61 billion, according to a Reuters poll. Its parent company, The Israel Corporation, advanced 1.2%.

Teva Pharmaceuticals rose 1.2% amid reports that it is seeking to buy Adcock Ingram, South Africa’s largest supplier of hospital products. Adcock said on May 10 that it had received a number of non-binding offers to buy the company but didn't name any of the potential bidders.

Other major movers on Monday included car importer Delek Auto, which lost 1.5% as some NIS 93.2 million shares changed hands. Itruan, a maker of vehicle-location technology, advanced 4% after it said net profit in the first quarter rose almost 18% to $6 million as sales rose 98% to $41 million. Apparel retailer Golf rallied 7.8%, extending its Sunday gain following strong first-quarter results.

With reporting by Reuters.

Emil Salman