Tel Aviv Stock Exchange Follows World Markets Lower

But key index recovers from its low for the day as the dollar posts big gain on the shekel

Trading screens in Kuala Lumpur, Malaysia are almost all deep in the red on Tuesday, Feb. 6, 2018.
Vincent Thian/AP

The Tel Aviv Stock Exchange closed down sharply for a third day running, but off its lows for the day, as nervous share markets around the world continued to follow Wall Street lower.

The TASE’s blue chip TA-35 index ended down 1.5 percent at 1,482.71 points in very heavy trading, bringing its three-day decline to 3.7 percent. The broader TA-125 lost 1.7 percent to finish at 1,342.64, with only three of its component shares finishing higher for the day. But at its lowest point during the session, the TA-35 had fallen to as low as 1,453.95 before clawing back some of its losses.

In foreign currency trading, the dollar strengthened 1.25 percent to a representative rate of 3.4850 shekels while the euro gained more than 0.5 percent to 4.3039 shekels. Corporate bonds traded on the TASE were also down sharply, with the main indices losing about as much as 0.3 percent, but government bonds traded quietly.

Markets in Asia and Europe fell sharply on Tuesday in response to the Wall Street decline that began last Friday. But after a torrid opening on Tuesday, U.S. stock markets were see-sawing between positive and negative territory in early trading amid bargain-hunting and gains for Apple shares. At midday local time in New York Tuesday, the Dow Jones Industrial Average was down 0.14 percent to 24,311.38 and the S&P 500 had lost 0.3 percent to 2,640.99.

Despite the trauma, analysts in Israel and overseas were hedging their bets on how deep the global sell-off would be, with most terming it a temporary correction after a sustained period of share price rises, especially in the past year.

“This is not the end of the bull market, but it is the end of the super low volatility regime,” said David Lafferty, Chief Market Strategist at Natixis Investment Managers. “The last two days of trading has thrown a giant bucket of cold water on the short volatility trade, and I think we’re now in for prolonged period of elevated volatility generally.”

The original trigger for the sell-off was a sharp rise in U.S. bond yields late last week after data showed U.S. wages increasing at the fastest pace since 2009. That raised the alarm about higher inflation and, with it, potentially higher interest rates. That could be painful for markets that have been propped up by central banks’ stimulus for many years. The yield on 10-year U.S. Treasuries rose to as high as 2.885 percent  on Monday, its highest in four years. At midday on Tuesday it pulled back to 2.756 percent.