Market Report / Mellanox Lifts Tel Aviv Stocks

The economic data coming out of the U.S. and Israel point to slowing economic growth and possible even a recession lying ahead.

Tel Aviv Stock Exchange shares ended the week higher on the back of a positive trend on Wall Street overnight.

The economic data coming out of the United States and Israel point to slowing economic growth and possible even a recession lying ahead, but investors are look for comfort from the round of second-quarter earnings reporting starting to come out now, including those of dual-listed Israeli companies.

That was the job of Mellanox, the semiconductor company, whose shares soared 47% yesterday on its quarterly earnings (see page A10 ). The rise added NIS 5 billion to the company's market capitalization in the space of a few hours and carried the rest of the market higher with it.

The TA-25 index rose 2.1% on Thursday to 1,079.46 and the broader TA-100 by 1.7% to 983.62. But the rise was not shared by everyone: The TA-Banking index declined 1.75% and the real estate index edged just 0.15% higher. The rise for the broad indices was accompanies by unusually heavy turnover after a long dry spell, with NIS 2 billion changing hands. The activity, however, was concentrated in three stocks - Mellanox, Teva and Israel Chemicals - which accounted for just over a third of the total volume. Teva edged down 0.2% while ICL lost 1.4%.

For the week, the TA-25 and the TA-100 index advanced 1.1% and 1%, respectively, while the banking index shed 5.8%.

If Mellanox was not enough good news, technology shares got a second boost in late trading yesterday as Wall Street opened higher.

Looking at the broader picture, though, economists are growing increasing doubtful that the U.S. economy can stave off recession. Yesterday, U.S. Federal Reserve Chairman Ben Bernanke's testimony before a Senate committee quelled hopes for quick Fed action after recent moves by central banks in China and Europe to bolster a sputtering global economy.

Bernanke repeated the Fed's pledge to act if needed, even while offering no new clues on when or how the central bank might offer extra support to the U.S. economy.

Insurance stocks continued to trade in the shadow of industry upheavals. The latest shock is reductions in premiums in the tens of percent paid by pension savers for the workman's compensation portion of their program. Against that, the premium for the death benefits portion of their pensions will rise sharply for people under age 35. The insurance index fell 1.4% yesterday, bringing its decline since the start of the month to just under 12%.

Babylon, the online translation company, officially announced it is planning to list its shares in the United States and is in initial stages of discussion on the matter with investment banks. The news brought the share 6.2% higher yesterday, capping a 300% rise since the start of the year.

EZ Energy, an operator of gasoline stations that is struggling to repay debt, said a U.S. subsidiary agreed to sell all its American operations for $64 million and the value of inventory at hand. EZ jumped 20.8%.

The shekel continued to weaken against the U.S. dollar after the greenback broke through the NIS 4 barrier on Wednesday for the first time in three years. The dollar was fixed at NIS 4.035 yesterday, as the dollar gained another 0.65%. The shekel also lost ground against the euro, which strengthened 1.2% to NIS 4.96. "The situation is such that each further depreciation of the shekel causes it to get further away from purely economic calculations [on the part of traders]," said Ronen Menahem, head of investments and strategy at Mizrahi Tefafot. "This could be a function of inertia or momentum, together with real concerns about the economic, fiscal and geopolitical situation."

He said there were also factors working in favor of the shekel, particularly the fact that interest rates in Israel are higher than in most of the developed world, as is Israel's economic growth rate. Inflation is likely to trend lower in the next few months, he added.


Reuters contributed to this report.