Market Report / Shares on TASE Turn Lower in Last Hours of Trading

But bond prices rise on news that July interest rates will remain at 1.25%

The Tel Aviv Stock Exchange gave short shrift to rebounding global markets on Tuesday, turning suddenly lower at the end of the session and erasing all of its gains from the morning. Insurance shares led the market lower for a second session.

The benchmark TA-25 index opened higher in the morning and preserved its gains for the next several hours before losing altitude after 3:30 P.M. and crash-landing just before closing time. The index closed at 1,195.75 points, a loss of 0.26% for the day. The broader TA-100 index closed down 0.2%, at 1,069.35 points. Turnover reached NIS 1.17 billion, led by Israel Chemicals' NIS 128.7 million. ICL shares ended unchanged.

The TASE's decline stood in stark contrast to global equity markets, which rose on Tuesday after better-than-expected government reports on the U.S. economy and strong consumer confidence data gave investors a reprieve about worries over Federal Reserve policy.

Orders for durable goods rose more than expected in May and a gauge of planned business spending gained for a third straight month, while existing single-family home prices posted their biggest rise in seven years in April. The Conference Board's U.S. consumer confidence index rose in June to 81.4 from a downwardly revised 74.3 in May.

Global markets tracked by MSCI's all-country world equity index were up 0.7%, while the FTSEurofirst 300 index of leading European companies rose 1.4%, recovering some of the 5.5% it lost in the previous three trading days. In New York in late morning, the Standard & Poor's 500 Index gained 0.7% to 1,584.35 points and the Nasdaq Composite Index rose 0.5% to 3,336.31 points.

In Tel Aviv, bond prices turned higher on Tuesday, a day after the Bank of Israel announced it was holding its base lending rate unchanged for July at 1.25%. The government's 10-year shekel bond rose 0.71%, cutting its yield to 3.84%. The inflation-indexed Galil bond for the same term rose 0.44%, with its yield falling to 1.73%.

"We've seen overshooting here as a result of aggressive selling. There's no need to panic. We need to wait patiently and not run to sell," Danny Yardeni, senior investment manager at Altshuler Shaham, said about the sharp decline in government bonds in recent weeks. "From an economic standpoint, there is a powerful logic to holding bonds The yields on long bonds are attractive at 4%."

Insurance stocks led the market lower, with Menorah down 2.3%, Harel and Migdal both off 2.2% and Clal Insurance down 1.4%. Telecoms shares were sharply higher, led by a 2.9% advance for Cellcom Israel and a 1.3% rise for Bezeq in heavy trading of NIS 97.2 million.

Allot Communications led Tuesday's gainers, jumping 9.4% after the internet protocol services company said it secured orders for its Allot Service Gateway from three top telecommunication operators in Europe and the United States to help with their network rollouts. Financial terms were not disclosed.

TowerJazz, the semiconductor maker, gained 4.1% after a report that a consortium it belongs to won a tender to build a semiconductor plant in India. According to the Calcalist Israeli financial website, TowerJazz will provide know-how, consulting and support services for fees of $300 million over six years and will book profits of 90%.

Mellanox, the semiconductor company on its way to being delisted from TASE trading, posted a 5.2% advanced on Tuesday. Jonathan Kreizman, an analyst at Clal Finance, said that based on hints from management he believe it is likely the company is involved in Microsoft's plans to build a $680 million server farm in Des Moines, Iowa.

Reuters and AP contributed to this report.

TowerJazz