Tel Aviv shares ended lower on Tuesday, joining world markets hit by fears that major central banks are cooling their commitment to pumping money into economies to spur recovery.
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Investors sold off stocks and commodities worldwide, although Wall Street was well off its lows by midday as investors took dips as a chance to buy.
The decline was triggered in Tokyo when the Bank of Japan elected not to take fresh measures to tackle rising government bond yields that threaten to thwart its $1.4 trillion stimulus program. That news sparked a further reversal of bets on stocks, emerging-market debt and other assets bolstered by accommodative monetary policies.
European shares fell to six-week lows, with the pan-European FTSEurofirst 300 index provisionally down 1.2% at 1,179.40. On Wall Street, the Standard & Poor's 500 Index fell 0.3% to 1,638.32 and the Nasdaq Composite Index fell 0.3% to 3,462.33 at about noon.
The dollar dropped 1.7% to 97.11 yen, having hit a session low of 96.47 yen, according to Reuters data. The euro fell 1.6% to 128.70 yen. Against the shekel, both currencies gained. The dollar advanced about 0.3% to a Bank of Israel rate of NIS 3.6420. The euro made a particularly sharp gain against the Israeli currency – nearly 0.9% to NIS 4.8388.
On the Tel Aviv Stock Exchange, the benchmark TA-25 and the broader TA-100 indexes both closed 0.7% lower to 1,228.17 and 1,104.08 points, respectively, as some NIS 1.03 billion in shares changed hands.
The bond market saw sharp declines with the Tel-Bond indexes down as much as 0.36%. Among the biggest drops in the corporate bond sector was Habas, which is the subject of a struggle for control. The prices for its Series 12 bonds tumbled 4.3%; for its Series 14 debt the drop was 3%.
Ten-year government bonds linked to inflation fell 0.55%, while similarly dated shekel bonds were off 0.6%. Yair Pagut, chief strategist at the Ayalon Group, attributed this to trends in the United States.
"The mini-drama unfolding in front of us right now reflects the continued rises in yields in the local debt market, which in turn reflect rising yields in the U.S. to 2.2%," he said. "The price of Israeli government debt has fallen 2.5% since the Bank of Israel made its surprise rate cut in the middle of May."
Financial and property shares led the stock market lower, with the TA-Insurance index down 1.9% at the close and the Real Estate 15 index off 2%.
Among property shares, Gazit Globe tumbled 3.7% in heavy trading of NIS 92.3 million. Aloni Hetz lost 1.6% to NIS 23.73 after it completed the institutional tranche of a NIS 238.5 million sale of shares and warrants in a package that effectively priced the shares at NIS 23.36 each.
Other real estate shares to slide Tuesday included Lev Leviev's Africa Israel Investments, which ended down 2%, and David Azrieli's Azrieli Group, down 1.9%. Shari Arison's Housing & Construction fell 2.3% to NIS 8.12 even after Halman-Aldubi Investment House upgraded the stock to Overweight with a target price of NIS 8.80.
Insurance stocks were paced lower by Migdal, which declined 2.3% on turnover of more than NIS 11 million. Clal Insurance dropped 2.4% and Menorah fell 2%.
Technology shares were mixed, with many of them topping the lists for the day's gainers and losers.
Semiconductor company EZchip posted the biggest gain among TA-100 stock, advancing 2.9% even though it is due to lose its place in the TA-25 index next week. Allot Communications rose 2% and LivePerson 1.3%. But Mellanox, another chip company exiting the TA-25, sank 3.3% and Babylon lost 3.2%.
Israel Chemicals was Tuesday's turnover leader, with NIS 105.3 million in shares changing hands on a 2.2% decline. ICL's parent company, The Israel Corporation, dropped 2.8%.
With reporting by Reuters.