Market Report / Dollar Sinks Below 3.50 Again as Shares Decline

TASE benchmark index drops among worries about economic policy

The dollar fell below 3.50 shekels for the second time in two weeks Tuesday and the Tel Aviv Stock Exchange’s benchmark TA-25 declined amid worries about economic policy.

The U.S. currency weakened more than 0.4% to a Bank of Israel rate of 3.4880 shekels, and was trading at 3.4860 shekels in late trading despite the bank’s intervening to the tune of $100 milion in the market during the day. The euro shed even more value, declining close to 0.6% to a Bank of Israel rate of 4.7700 shekels.

Currency trader FXCM attributed the dollar’s drop Tuesday to a combination of the U.S. currency’s weakness in global markets and the Bank of Israel’s decision overnight Monday to leave its base lending rate unchanged at 1% for January.

“The dollar is expected to continue weakening in 2014 until the U.S. Federal Reserve begins to signal the end of its stimulus program,” FXCM said. “The Bank of Israel will need to focus efforts in putting a brake on this trend by intervening in trading and lowering interest rates further.”

Noting that an exchange under 3.50 damages the economy, FXCM said it expected the central bank to enter the forex market in the coming days.

On the TASE, the TA-25 held steady in the morning before heading lower in the afternoon to end down 0.5% for the session at 1,341.67 points. The broader TA-100 finished 0.4% lower. Turnover was a relatively thin 1.1 billion shekels.

Bond prices were also sharply lower. The Tel-Bond 20, 40 and 60 indices fell as much as 0.35%, while the government’s 10-year shekel bonds declined 0.24% and its inflation-index bond for the same term dropped by 0.32%.

The only sector to resist the downturn was technology. LivePerson, the customer-service technology company, finished 5% higher, making it the biggest gainer of TA-100 stocks for the day after The Benchmark Company raised its rating to Buy from Hold. Gilat, the maker of satellite communications equipment, added 2.8% and Mazor Robotics rose 2.1%.

Collplant, a maker of medical devices, jumped 4.9% after it completed raising 21.1 million shekels in new shares together with warrants that could bring in another 63 million shekels in the future.

U.S. shares edged higher into record territory in a holiday-shortened session Tuesday, backed by stronger-than-expected manufacturing sector data. In late-morning trading New York time, the Dow Jones industrial average was up 0.2% at 16,333.99. The Standard & Poor’s 500 Index was also up 0.2% at 1,832.10, while the Nasdaq Composite Index had edged 0.06% higher at 4,151.43.

Several European stock markets were closed Tuesday for the Christmas holiday, but pan-European equity indexes such as the FTSEurofirst 300 and the STOXX 600 crept higher, extending their gains to five straight sessions.

Despite Tuesday’s decline, the TASE has been showing in the last months of the year increased trading volume and higher prices, even if the TA-25 is off its December 1 high. But  Erez Tzadok of Aviv Mutual Funds said the gains aren’t justified.

“There is no responsible adult overseeing the economy, the worsening slowdown and the wave of layoffs,” he said. “We recommend focusing on shares of companies whose main operations are overseas or are developing those kind of operations.”

Among the session’s losers on the TASE, semiconductor maker TowerJazz retreated for a second day, losing 4.2%, after rallying on news Sunday that it was forming a joint venture with Japan’s Panasonic. Bezeq fell 1.6% and its parent company B Communications dropped 2.6%.

Phoenix, the insurance company, slid 3.2% to 13.02 shekels. Its two controlling shareholders, Yitzhak Tshuva’s Delek Group and Mayer’s Cars & Truck, sold some 70 million shekels of Phoenix shares for 12.80 shekels each. The block was equal to about 2.5% of the insurer’s shares outstanding.

Reuters contributed to this report.

Gilat