Market Report / New Euro Worries Carry TASE Lower

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Discouraging economic data out of Israel and Europe, as well as a sharp drop in shares of EZchip, left the Tel Aviv Stock Exchange lower for a second day running on Thursday.

The benchmark TA-25 index finished at 1,220.71 points, a drop of 0.24% while the TA-100 lost 0.5% to close at 1,087.23. Technology shares were down sharply, with EZchip’s plunge echoed by falling prices for a host of the tech shares. The TA-Technology index ended down 2.1% at 321.57. Volume was a moderate NIS 863.2 million. For the week, the main indices were up, with the TA-25 advancing 0.8%, bringing its year-to-date rise to 3%. The TA-100 was ahead 0.6% for the week and 3.6% for the year so far.

Thursday’s decline came after data showed that the euro zone’s two biggest economies shrank even more than expected late last year, throwing a first-quarter regional recovery into doubt. The German economy contracted 0.6% in the final quarter of 2012, marking its worst performance since the global financial crisis was raging in 2009, while France’s 0.3% fall was slightly worse than forecast.

The FTSEurofirst 300 index of top European companies slipped 0.24% to 1162.84 and the euro fell 0.8% to 1.3344 against the dollar.

Back at home, the Bank of Israel said on Thursday that unless the government slashes spending and raises taxes, Israel could wind up with a budget deficit of 4.9% this year. In addition, the Central Bureau of Statistics reported that both exports and imports dropped sharply in the November 2013-January 2013 period.

The euro dropped against the shekel as well, shedding 1.3% of its value to a Bank of Israel rate of NIS 4.9076. The dollar lost 0.2% to NIS 3.68.

Despite Israel’s mounting economic woes, FXCM, the currency trader, said the shekel would not feel the effect. “The dollar shekel will maintain the status quo, absent any momentum in one direction or the other,” it said in a commentary Thursday. “The rate is trading in a very narrow band of NIS 3.66 to NIS 3.71. Only a breakout higher or lower will signal which direction it is going next.”

Intervention by the Bank of Israel in the forex market would change the situation entirely, FXCM warned. It said that the dollar’s falling below NIS 3.66 might be the trigger.

EZchip slipped and slid lower all day to finish down 18.8% on turnover of NIS 42.8 million, making it the third most active share of the day. The company said that China’s Huawei, one of its five major NP-4 network processor customers, has not yet placed any production orders and may “offer a lower-end in-house solution in parallel to the high-end NP-4 solution.” The news more than offset the announcement that it posted fourth-quarter earnings of 26 cents a share, five cents above the consensus estimate of analysts following the company.

Chipmaker TowerJazz fell 6.1% after it forecast a drop of about 32% in its first-quarter revenue. The company attributed the decline to lower sales to a major customer, Micron, at its Japanese plant, as well as a consumer shift from PCs to tablets. Sales will be between $110 million and $120 million, compared with analysts’ average estimate of $142.5 million, according to Thomson Reuters.

Mellanox, a fabless chip-maker, jumped 4% after it announced late in the trading session Thursday that Nasdaq OMX NLX was buying the company’s InfiniBand at its new London derivatives market. InfiniBand will act as the server interconnect for NLX’s matching engines.

Another tech stock to post a strong gain was Babylon, the online translation company, which added 5.9% to close at NIS 22.99 on unusually heavy turnover of NIS 58.6 million, making it the volume leader for the day. DS Investment House issued a report on Thursday saying the stock could reach NIS 44.

In energy stocks, Modiin dropped 9.7% after its two partners in the Gabriella exploration license didn’t come through with their $10 million of the $21 million they are due to pay Noble Drilling to begin drilling operations next month.

Reuters contributed to this report.

Tel Aviv Stock Exchange. Credit: Reuters

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