The Tel Aviv Stock Exchange ended lower Wednesday for the first time in three trading days amid concerns about the global economy and the possibility of the U.S. Federal Reserve ending its stimulus program.
The benchmark TA-25 index lost 0.6% to close at 1,233.41 points, while the broader TA-100 lost 0.7% to 1,109.95 points. Turnover was NIS 904.3 million. The decline affected almost the entire market but the insurance and telecommunications sectors were hit hardest: The TA-Insurance index plummeted 1.9%, to 1,420.47 points, while the TA-Communications index plunged 1.76%, to 555.28 points.
Markets have been concerned about the Fed's plans for more than week, since Federal Reserve Chairman Ben Bernanke suggested the U.S. central bank could begin to roll back its $85 billion-a-month funds injection. News on Wednesday that the Organization for Economic Cooperation and Development sees a second year of recession in the euro zone for 2013 only upped investors' jitters.
The OECD cut its growth forecast for China for 2013, from 8.5 % to 7.8%. The United States was seen driving global growth, expanding 1.9% but only thanks to the Fed stimulus efforts.
In Europe, the FTSE Eurofirst 300 index of top shares has dropped 1.7%, giving back all of the previous day's 1.3% gain and then some. The Standard & Poor's 500 Index was down 0.6% at 1,649.62 points in late morning trading in New York. The Nasdaq Composite Index was down 18.57 points, or 0.5% percent, at 3,470.32 points.
In currency trading, the dollar changed course Wednesday after strengthening on the back of the Bank of Israel's Monday rate-cut announcement. The greenback's Bank of Israel rate was set at NIS 3.6490, a loss of 0.35% against the shekel. The euro lost 0.3%, to NIS 4.7813.
Since its low of NIS 3.55 in mid-May the dollar gained 4% on the shekel, but currency trader Atrade said the U.S. currency is poised to appreciate.
"The U.S. dollar will continue to strengthen against the shekel because the Bank of Israel is determined to weaken the shekel and because the dollar is strengthening globally," Atrade said in a comment yesterday.
On the TASE, government bonds fell as much as 0.9% despite the Bank of Israel rate cut. Ten-year shekel bonds fell 0.98% to a yield of 3.69% while inflation-indexed bonds declined 0.87%, raising their yields to 1.39%. The Tel Bond-20, 40 and 60 indexes lost as much as 0.5%.
Traders attributed the drop to a sell-off on Wall Street, where benchmark 10-year notes fell more than a point on Tuesday to 96-7/32, causing their yields to soar to 2.17%, up from 2.01% on Friday.
Rami Levy shares ended down 4.2% after Citigroup lowered on Wednesday its rating to Neutral from Buy. The discount grocer has enjoyed a 39% rise in shares in the past year, bringing the stock close to Citi's NIS 185 target price. Profit margins dropped in the first quarter, analyst Michael Klahr said, but added, We have not changed our view on the strong fundamentals of this business."
First International Bank of Israel gained 1.2%. Although it reported that first-quarter net profit dropped to NIS 136 million from NIS 143 million, that was due to a NIS 24 million provision ordered by regulators against its mortgage portfolio.
Among earnings casualties in Wednesday trading, Lev Leviev's Africa Israel Investments fell 3.3% after turning in a NIS 75 million first-quarter loss, versus a NIS 10 million profit a year earlier. Earnings from rental properties rose slightly, but operating profiting in its industrial segment declined 15%, the company said.
Top gainers in Wednesday's market were paced by The Israel Corporation, which has been rallying since it decided to shutter its Better Place affiliate.
Idan Ofer's holding company rose 3.1%. Strauss extended gains from a strong improvement in first-quarter earnings to add 1.9% while semiconductor maker TowerJazz rose 1.8%.
With reporting by Reuters.
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