Market Report / TASE Cheers Fiscal Cliff Resolution

Oren Freund
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Oren Freund

In a dramatic, last-minute rescue, the U.S. economy was pulled back from the edge of the "fiscal cliff" Tuesday - and the Tel Aviv Stock Exchange applauded heartily.

The benchmark TA-25 index of blue chip stocks ended at 1,214.59 points, a jump of nearly 2.5%, and the TA-100 advanced 2.6% to 1,076.43 as some NIS 971 million in shares changed hands on the TASE. The market was broadly and sharply higher, led by bank shares, with technology stocks not far behind.

The TA-Banking index rallied 3.7% to end at 1,180.08, paced by Bank Leumi with a 4.4% gain for the day. Israel Discount Bank was up 4.1%, First International Bank of Israel ahead 3.8%, Bank Hapoalim up 3.3%, and Mizrahi-Tefahot Bank ahead 2.2%.

The TA-Technology index finished up 3% at 3,334.98. The online translation company Babylon jumped 8%, while geothermal-power company Ormat added 4.1%. Nice System added 3.3%. Mellanox, the semiconductor company, was the only one of the TA-100 stocks to end the session lower, edging down 0.4% on brisk turnover of NIS 20.2 million.

Among the sectorial indices, the weakest performer was the TA-Communications index, which posted a mere 2.1% rise to 51.93 points.

Last-minute rescue in Washington

On New Year's Eve, the U.S. Senate voted 89-8 to avoid imminent tax hikes and spending cuts in a bipartisan deal that raises some taxes on the wealthy while making permanent low tax rates on the middle class that have been in place for a decade.

But the measure did little to rein in huge annual budget deficits that have helped push the U.S. debt to $16.4 trillion and could still face stiff challenges in the House of Representatives, where it was due for a vote sometime in the early afternoon Washington time.

With most of the world's market shut for New Year's Day, there was little immediate reaction to the deal, but Ofer Klein, chief economist at Harel Finance, said it constituted a dramatic reduction in the level of uncertainty that has been plaguing the TASE and other world financial markets. He warned, however, that the respite is only temporary.

"There are still two outstanding issues in the United States - the cut in the U.S. budget and the deficit ceiling, which will be reached some time at the end of February or in early March," Klein said.

The TASE faces a period of volatility because of continued uncertainty about U.S. fiscal problems, the Israeli election on January 22, and the challenges the next government faces putting the country's fiscal house in order.

"There's no doubt that we will see big cuts in the most significant areas of the U.S. budget, namely defense, and therefore companies operating in the defense sector are headed for a slowdown," Klein said.

Elbit Systems, the defense electronics maker, rose yesterday, but at a modest 0.5%.

IDB Holding Corporation jumped 8.5% on news that its parent company, Nochi Dankner's Ganden Holdings, together with Africa Properties, had sold the Lev Talpiot Mall in Jerusalem to the Reit 1 property investment fund for NIS 130 million. The proceeds will help Ganden repay some NIS 600 million in bank loans.

Africa Israel Investments, climbed 11.6%. Lev Leviev's holding company a bond swap it completed today would save it some NIS 100 million.

Oil Refineries Ltd. (Bazan ) advanced 0.1%. Management said it would take a 10% pay cut and lay off 30 to 40 employees as part of a cost-cutting plan that began in 2012. The company said unions had consented to the measures.

Clal Biotechnologies rose 1.5% a day after it said it was changing its policies about subsidiary companies and would offer to buy minority shareholders in D-Pharm and Biocancell. D-Pharm rose 26.3% to 74 agorot and Biocancell jumped 55.2% to 72 agorot.

Israel Chemicals finished 3.5% higher by close, reversing a big drop a day after Potash Corporation of Saskatchewan said it had signed a deal to sell potash to China at $400 a ton, well below previous estimates of a $470-per-ton price for the deal.

Reuters contributed to this report.

The U.S. Capitol at dusk in Washington, DC, on December 31, 2012.Credit: AFP

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