The Tel Aviv Stock Exchange broke a nine-session string of gains on Tuesday to end lower and the dollar extended its gains on the shekel a day after the Bank of Israel surprised the markets by lowering its base lending rate.
The benchmark TA-25 index, which had risen 8.2% since September 8 to hit a two-year high this week, closed 0.4% lower at 1,256.36 points. The broader TA-100 posted a narrower 0.2% decline to 1,135.82. Turnover was a brisk NIS 1.58 billion considering the trading day ended early for the intermediate days of the Sukkot holiday. Trading does not resume until next Sunday.
The dollar advanced 0.3% on the shekel to a Bank of Israel rate of NIS 3.5260 while the euro strengthened 0.3% to NIS 4.7649.
Currency trader FXCM attributed the dollar's advance not only to the Bank of Israel's decision to lower the base rate by a quarter point to 1% but also to a strengthening dollar globally.
By lowering rates, FXCM said the central bank was sending a bearish message about the Israeli and world economies. "While the bank stressed that the shekel's appreciation was one of the factors behind its decision to lower the interest rate, it appears that the central consideration came from a downgrade in forecast Israeli economic growth," it said.
In the bond market, the Tel-Bond indices rose as much as 0.33%. The government's 10-year Shahar bond rose 0.18% while its inflation-indexed Galil bond for the same term jumped 0.55%.
Anxiety over the lack of clarity on U.S. fiscal and monetary policies continued to weigh on world shares on Tuesday, keeping major currencies in tight ranges. A political showdown looms in Washington over budget talks and investors continue trying to decipher a string of contradictory comments from Federal Reserve officials over the future of its stimulus program.
In New York at mid-morning, the Dow Jones industrial average was down 0.1% at 15,379.61, the Standard & Poor's 500 off 0.2% at 1,698.43 and the Nasdaq Composite Index steady at 3,762.37. In Europe, FTSE EuroFirst 300 was flat at 1,256.10 points.
In TASE trading, Israel Chemicals led the most actives, with NIS 118.9 million shares changing hand on a 3.5% drop. A Chinese sovereign wealth fund acquired a stake in Russian potash maker Uralkali, a move that analysts said could upset both the world potash cartel and ICL's key China market. ICL's parent company, The Israel Corporation, fell 2.7%.
Bank shares were mostly lower, with the TA-Banking index down 0.9%, led by a 1.8% decline for Israel Discount Bank and a 1.1% drop for Mirzahi Tefahot.
Given Imaging, the camera-in-a-capsule maker that rallied on a Japanese regulatory approval for its Pillcam 3, retreated on Tuesday to end 2.8% lower. Ceragon Networks followed a similar trajectory, rising on Monday after winning an Indian contract and falling on Tuesday by 2.9%.
Among gainers, Bezeq advanced 2.1%, resuming its rally, on turnover of NIS 109.4 million. Teva Pharmaceuticals closed 1.1% higher after it said it had launched its generic equivalent to Adenoscan in the United States. Teva was first to file, making the product eligible for 180 days of marketing exclusivity in the $65 million market for the drug. Evogene, the plant genomics company, rose 2.1% after announcing it has filed for an initial public offering on Wall Street.
On a sectorial basis, insurance shares were the day's top performers, with Clal Insurance up 1.9% by the end of trading and Harel ahead 1.7%.
Reuters contributed to this report.