Stocks have fallen sharply on the Tel Aviv Stock Exchange this morning in the wake of the slide on world markets on Friday, when the Dow Jones Index fell 3.1%, making it a 10% drop since the peak recorded in May. The Tel Aviv 25 Index is currently down 3.25%.
The atmosphere on the markets was tense throughout last week following the devaluation of the yuan by the Chinese government on Sunday, and there were warnings that a painful fall could occur within days. The Chinese procurement managers' index reading released on Friday was a six and a half year low, indicating a sharp slowdown in China, worse than the markets had thought. This slowdown, together with sharp falls in the currencies of emerging markets, can be expected to hit the profits of many Western companies active in those markets.
The prevailing view on Wall Street is that the correction will continue, but it is hard to find analysts or investment managers who believe that this is the start of a collapse. The assessment is rather that the correction will generate buying opportunities, but that it is necessary to wait until it has run its course.
In Israel, the markets are also looking to the Bank of Israel's interest rate decision for September, due on Monday. After last week's disappointing GDP figures and the fall in inflation expectations, it looks as though the Bank of Israel's estimates of robust growth and rising inflation are fading. Analysts say that the Bank of Israel will find it hard to remain indifferent to the latest macro figures, and that it will cut its interest rate. The falls on the stock markets, threating global growth, can only act as an additional spur for the Bank of Israel to act.
Leumi Capital Markets macroeconomic analyst David Reznik says that the Bank of Israel will probably cut its interest rate tomorrow, and that current market conditions will make the US Federal Reserve to postpone any interest rate hike until the beginning of 2016.
Among the leading shares, Teva is currently down 3.58%, Bank Hapoalim is down 3.11%, Bank Leumi is down 3.77%, Bezeq is down 2.79%, and Perrigo is down 3.37%. Telecommunications stocks Cellcom and Partner are down 7.89% and 7.6% respectively, and Tower Semiconductor is down 7.4%.
Published by Globes [online], Israel business news - www.globes-online.com - on August 23, 2015
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