Market Report

Markets Climb Despite U.S. Government Shutdown

Bank of Israel buys some $100 million greenbacks to stem a strengthening shekel, but dollar still ends up down.

Tel Aviv shares resumed their gains on Tuesday in relatively heavy trading, while the shekel advanced on the dollar despite the Bank of Israel's effort to reverse the direction.

Shrugging off the impact of the shutdown of the U.S. government, the benchmark TA-25 index added 0.8% by closing time to 1,274.78 points on a turnover of NIS 1.143 billion. The broader TA-100 index finished 0.7% higher at 1,150.47. Technology, telecommunications and insurance shares led the advance.

The TASE was not alone on Tuesday, as stock markets worldwide climbed while safe-haven investments such as gold and Treasury bonds tumbled on expectations that the first partial shutdown of the U.S. government in 17 years would be temporary.

"People expect this will be relatively short-term, with the impact hopefully minimal, but the longer it goes on, the more pressure Washington will face," said Robert Pavlik, chief market strategist at Banyan Partners, LLC in New York.

By late morning New York time, the Dow Jones Industrial Average had gained 0.4% at 15,181.89. The Standard & Poor's 500 Index was up 0.7% at 1,693.25 and the Nasdaq Composite Index had gained 0.9% to 3,805.70.

The euro zone's blue-chip Euro STOXX 50 index was up 1% at 2,922.12 points. MSCI's world equity index, which tracks shares in 45 countries, rose 0.6% to 384.46.

The dollar edged down to its lowest level in nearly eight months against a basket of currencies, which lifted the euro to an eight-month high of $1.3588.

The Bank of Israel bought some $100 million of the greenbacks on Tuesday to stem a strengthening shekel, but the dollar still ended down about 0.14% at a Bank of Israel rate of NIS 3.5320. The euro appreciated more than 0.2% to NIS 4.7845.

In spite of the U.S. currency's weakness, FXCM said the direction could change, noting investors faced a week of potential surprises.

"If we see a jittery markets and declining share prices due to the U.S. government shutdown, demand for the dollar can be expected to grow, which will bring about a strengthening of the U.S. currency versus the shekel," it said. It predicted potential volatility around an address by U.S. Federal Reserve Chairman Ben Bernanke scheduled for Wednesday and a report of U.S. employment on Friday.

In TASE trading, prices for the government 10-year Shahr bond fell 0.12%, raising the yield to 3.79%. Its inflation-indexed Galil bond for the same term dropped 0.39%, bringing the yield to 1.79%. The Tel-Bond 20, 40 and 60 indices lost as much as 0.1%.

In equities trading, Israel Chemicals led the most actives, with NIS 221.8 million in shares changing hands, although it posted a modest 0.5% rise. Its parent company, The Israel Corporation, jumped 4% on turnover of NIS 147.2 million. ICL shares have been convulsed by a rapid series of developments in the global potash market over the last weeks.

Biotechnology stocks rose sharply, with the TA-Biomed index advancing 1.65% to 1,015.93.

Can-Fite, which is developing treatment for inflammatory and cancer diseases, soared 27% after Roth issued a buy recommendation with a target price for the Nasdaq-traded stock of $15. The Nasdaq stock, which was also rallying on the news, was trading at $6.23 at noon, New York time.

Less dramatically, Clal Biotechnology extended its rally, adding 6.9% at close and Compugen rose 3.2%. Pluristem advanced 3.9% after the developer of placenta-based cell therapies reported that its PLacental eXpanded cells demonstrated efficacy in a preliminary animal experiment for the treatment of Graft versus Host Disease. Cellect Biotechnology, which is developing solutions for immune system regeneration, jumped 69.2% although the company reported no news.

Other big gainers on Tuesday were Partner Communications, which rose 3.3%

Reuters contributed to this report.

Bloomberg