A rocket from Gaza and inconclusive election results in Italy conspired to send the Tel Aviv Stock Exchange lower Tuesday.
The TA-25 blue-chip index finished 0.2% lower at 1,217.90 points on turnover of NIS 982 million. The broader TA-100 fell 0.3% to 1,066.20, with insurance and real estate stocks pacing the decline. The TA-Insurance index ended 1.1% lower at 1,248.47 and the Real Estate 15 index fell 0.7% to 319.38.
Some investors were spooked by the rocket that landed in southern Israel, though Tel Aviv performed better than most of the world's stock markets. Shares sank on fears that political gridlock in Italy created by Monday's vote would leave its economic reforms in tatters and reignite the euro zone's broader debt crisis.
The pan-European FTSEurofirst 300 index was down nearly 1% in late trading. London's FTSE 100 was down 1.25%, while Paris's CAC-40 and Frankfurt's DAX were down as much as 1.7%. The euro traded around $1.3050, just above a seven-week low.
"The Italian elections were the trigger for a correction in Far East and European markets," said Ariel Mazuz, investment manager at Prico Risk Management. "The TASE reacted more moderately because the situation in the West Bank has cooled and the Bank of Israel didn't lower interest rates."
After trading ended Tuesday, the Bank of Israel left the base lending rate unchanged at 1.75%, a decision Mazuz called "an upside down on an upside down" because not lowering the rate signals that the economy is not slowing as badly as thought.
Against the shekel, the dollar extended gains yesterday, adding 0.6% to a Bank of Israel rate of NIS 3.733. The euro, however, weakened more than 0.2% to NIS 4.887 after a strong gain on Monday, when it briefly reached NIS 4.95.
"The inability of the euro-shekel to stay above NIS 4.90 exposes it to downward pressure," said currency trader FXCM. "As long as the euro's weakness continues globally amid political instability, it will also weaken against the shekel to levels of NIS 4.85 or NIS 4.83 as its first stop."