The Tel Aviv Stock Exchange changed course again Wednesday, ending sharply lower as the world’s financial markets remained volatile. The foreign currency market was also a boil, with the dollar gaining sharply on the shekel amid renewed speculation of a Bank of Israel rate cut.
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The TASE’s benchmark TA-25 index ended down 1.1% at 1,591.19 points. The decline followed Tuesday’s rebound that followed two days of sharp falls. That left the index down 6.1% this week, with another day of trading yet ahead.
The broader TA-100 lost 0.7% to 1,390.59, and turnover remained high with 1.86 billion shekels ($470 million) in shares changing hands. Despite the overall loss, some sectors gained instead of the full-fledged rout earlier in the week.
Mutual fund redemptions shrank to just 500 million shekels on Tuesday, down from a peak of 2.5 billion the day before.
In foreign currency trading, the dollar appreciated nearly 1.5% to a Bank of Israel rate of 3.9210 shekels, its highest level since the end of April, and was trading at 3.9242 late in the day. The euro gained 0.55% to 4.4749.
The dollar’s move came as the greenback rallied globally. Over here, it was buoyed by remarks by Bank of Israel Governor Karnit Flug, who hinted that the bank was weighing cutting its base rate, now 0.1%, into negative territory.
“There are countries with negative interest rates; in certain circumstances you can do that,” she told Channel 2 television. On Monday, as global markets were plunging, the Bank of Israel left the rate unchanged, but Flug told Channel 2: “In an unclear and volatile situation, the right thing to do is to stop.”
Currency dealers said eyes weren’t on the U.S. Federal Reserve, which had been expected to raise its lending rate next month — a move that might spare its Israeli counterpart the need to lower its rate.
“The key question in the world currency markets is just one: Whether the currency gyrations will cause the Fed to delay a rate rise or not. If the volatility continues into September, the odds of a delay grow,” said Israeli currency trader FXCM.
Nevertheless, the fixed-income market was mixed. Corporate bonds extended their losses, with the Tel-Bond 20, 40 and 60 edging 0.01% to 0.03% lower. The government’s 10-year shekel bond also fell 0.23% to raise its yield to 2.14%, but the government’s inflation-linked bond for the same term was up 0.25% to a yield of 0.65%.
Globally, markets were moving in different directions, giving TASE investors precious few clues on how to act.
Asian stocks flip-flopped Wednesday after China cut interest rates in a bid to restore confidence in its sagging economy. Hong Kong’s Hang Seng also closed lower, while Japan’s Nikkei jumped 3.2%.
The pan-European FTSEurofirst 300 index pared losses of nearly 3% as hopes of further monetary support from the European Central Bank eased concerns about China’s economy. But U.S. stocks opened sharply higher, with all three major indexes up after data showed that durable goods orders rose more than expected in July. At 10 A.M. in New York, the Dow Jones Industrial Average was up 2% at 15,979.68.
“These types of swings are typical when the market behaves in a way that is a real test of nerves and there is a lot of ongoing uncertainty,” said Peter Cardillo, chief market economist at Rockwell Global Capital in New York.
On the TASE, telecom shares were sharply higher after Golan Telecom said it was seeking to buy a rival or be bought. Energy shares were sharply lower after Economy Minister Arye Dery threw another wrench in the process for approving the natural-gas deal by suggesting he might delay antitrust approval.
Elco led the TA-100 lower, falling 5.2% to 30.02 shekels. Israel Corporation, which is exposed to the Chinese market through an auto-making joint venture, dropped 4.3% to 1,156. But Opko Health rose 2.5% to 42.76 shekels and IDB Development Corporation was ahead 3.4% by the close at 2.20.
With reporting by Reuters.