Market Report / Central Bank Interest-rate Cut Sends TASE Higher

After the Bank of Israel cut its lending rate for the second time in as many weeks, all the major indexes saw solid gains, matching the global trend.

The Tel Aviv Stock Exchange ended Tuesday's trading session with handsome gains in all the leading indexes, led by the index of insurance shares, which gained 5.5%.

Trading took place in the shadow of Monday's decision by the Bank of Israel to cut interest rates by 0.25%, leaving the base rate at 1.25%. This was the bank's second rate cut in two weeks.

The blue-chip Tel Aviv-25 Index gained 1.3% to close at 1,241 points, while the broader benchmark Tel Aviv-100 Index gained 1.5% to close at 1,118 points. The Banks-5 Index gained 2.35%, pulled upward by Discount Bank, up 2.65%. The Real Estate-15 closed up 2.45%.

Turnover was a reasonably high NIS 1.3 billion.

Ayalon Group chief strategist Yaniv Pagut said the central bank's decision to cut lending rates was the ultimate fuel for risky investment vehicles such as stocks. Companies will be able to borrow money for less, and as a result, the target prices for many companies' shares are likely to be adjusted upward, he added.

On the international scene, European shares headed back toward recent multi-year highs on Tuesday as pledges of continued monetary policy support from central banks in Japan and Europe calmed jittery investors.

Global stocks suffered last week on concern that the U.S. central bank would scale back its stimulus program, but the Bank of Japan said on Tuesday its expansive monetary policy would stay in place.

That followed similar comments from the European Central Bank on Monday, when UK and U.S. markets were closed.

In Asia, China shares climbed to their highest since March on Tuesday, lifting Hong Kong markets, while Japan's Nikkei share average rose too, with investors picking up recently battered stocks as the market regained a degree of stability.

On Wall Street, stocks rallied as the TASE prepared to close. The rally followed New York shares' first three-day losing streak of the year.

In Israel, many shares were boosted by their own newly published quarterly reports. Notable shares included insurance company Phonex and food maker Strauss, which published their financial reports for the first quarter. Phoenix's share gained 3.5%, while Strauss was up 4.5%.

Strauss reported strong operating profits, mainly due to its coffee business outside Israel, and also stated that former Bank Leumi CEO Galia Maor would be joining its board (see article). Total sales were down 2.5% compared to the parallel quarter in 2012 to NIS 2 billion.

Gazith Globe and Mizrahi Tefahot Bank also gained ground after publishing financials, up 2.8% and 2.3%, respectively. Mizrah reported first-quarter net profits of NIS 280 million, an 11.6% increase over the parallel quarter in 2012. Total revenue was NIS 1.2 billion, a 5% increase over the parallel.

Other notable gainers included Jerusalem Economy, up 4.2% after selling off assets in France, and TowerJazz, up 3.9%.

Companies closing in the red included oil and gas company Globe Exploration, which lost 5.7%.

With reporting by Reuters.

Bloomberg