Stocks rose Tuesday after the Bank of Israel surprised the capital markets with a sharper-than-expected interest-rate cut, then followed up by lifting its growth estimates and cutting its expected unemployment rate for 2007.
The central bank's rate cut - half a percentage point, to 4.5%, instead of the widely expected quarter-point - also had a bit of the effect manufacturers had hoped for, as the shekel, which has hammered the dollar this year, weakened. The central bank cited lower-than-target inflation and the shekel's strength against the dollar for the rate reduction.
The Tel Aviv Stock Exchange's benchmark TA-25 index rose 0.61% to 937.03, the TA-100 index added 0.59% to 933.08, and the Tel-Tech index of 15 top technology issues tacked on 1% to 365.36.
The most-active issues were Bank Leumi, up 0.9% at NIS 17.62, and Bank Hapoalim up 0.1% at NIS 20.19.
Volume on the TASE was $300 million, short of the 2006 average daily volume through November of $347m. Volume is likely to continue to be light through the New Year's holiday.
The Bank of Israel increased its forecasts for the country's economic growth for 2006 and 2007 and reduced the expected jobless rate, citing factors including signs of significant growth in fourth-quarter economic activity and an improving global economy.
The central bank, in a report, said gross domestic product should grow 4.8% in 2006 and 4.6% in 2007. Those estimates are up from earlier forecasts of 4.6% and 4% respectively. The GDP-growth figure was 5.2% in 2005.
The unemployment rate is now seen at 8.5% in 2006, falling to 8.1% in 2007. The previous estimates from the central bank were 8.8% and 8.4% respectively. The 2005 jobless rate was 9%.
Also figuring in the revised forecasts, the central bank said, were greater investments in major industries in 2006, which along with the job growth indicate that companies plan to increase production.
The central bank cut the benchmark rate on Monday. Exporters had been complaining that the stubbornly strong shekel was hurting their profits by making their products more expensive for overseas buyers. The shekel ended 2005 at 4.603 to the dollar; the Bank of Israel quoted the shekel's close Tuesday at 4.222, with the dollar gaining 0.86%.
The TA-25 was broadly higher with only five losing issues. Among the active gainers were Teva Pharmaceutical Industries, up 1.1% at NIS 132.9, telecom-service provider Bezeq, up 2.8% to NIS 7.03, and Ormat Industries, parent of power-plant producer Ormat Technologies, up 0.6% to NIS 48.02.
Two TA-25 members made news and finished lower: The first, foods producer Strauss-Elite, dropped 2.4% to NIS 45.69 after it was downgraded to "neutral" from "buy" by analyst Uri Waisbord at Israel Brokerage & Investments. Strauss-Elite shares neared the broker's target price of NIS 50. Waisbord also said a deal by the Israeli dairy Tara with the German dairy Mueller would boost Tara's competitive position against Strauss-Elite.
The second, defense contractor Elbit Systems, edged down less than 0.1% to NIS 135.2. The company said it implemented a border-control system for the Israel Police. Terms weren't disclosed. The company collaborated with Hewlett-Packard and Sapiens on the system.
Leading the Tel-Tech up were electronic-payment-solutions specialist Verifone, up 0.1% at NIS 152; defense contractor Tadiran Communications up 1.2% to NIS 164.6; Nice Systems, the producer of digital recording and archiving solutions, up 0.9% at NIS 130.2; and Gilat Satellite Networks, up 2.3% to NIS 37.84.
The Tel Aviv Real Estate 15 index ended 0.46% higher at 657.83. Africa Israel Investments rose 2% to NIS 303.8, Gazit-Globe added 0.7% to NIS 56.99, and Elbit Medical Imaging - which also has medical-scanning interests - rose 0.5% to NIS 136.9.
Off the indexes, Aura Investments rose 2.5% to NIS 3.36. The company, with real estate and hi-tech interests, said it would invest about NIS 115m. for 75% of a 385-unit residential project to be built in Ploiesti, Romania.
US stocks gained after falling bond yields pushed bank and utility shares higher and gold producers led an advance in raw-material companies as bullion rallied.
The S&P 500 rose 3.84, or 0.3%, to 1414.60 in late morning trade in New York. The Dow Jones Industrial Average added 32.28, or 0.3%, to 12,375.50 and the Nasdaq Composite Index climbed 7.99, or 0.3%, to 2,409.17.
Markets in London, Paris, Frankfurt and all other western European cities were closed.
Asian stocks rose, reversing an earlier decline. The Morgan Stanley Capital International Asia-Pacific Index added 0.3% to 138.95 as of 6:21 p.m. in Tokyo. It lost as much as 0.3% earlier. Japan's Nikkei 225 Stock Average rose 0.5% to 17,169.19, reversing a drop, while the broader Topix index gained 0.5% to 1,672.45.
Stock indexes dropped in South Korea, Malaysia and Indonesia. They rose elsewhere in the region. Markets in Australia, Hong Kong, New Zealand and the Philippines were closed for a holiday.
In New York trading, the dollar was quoted at 118.91 yen, compared with 118.78 yen late Friday. The euro changed hands at $1.3135, up from $1.3131. The British pound traded at $1.9574, up from $1.9620. The euro fetched 156.22 yen, rising from 156.13 yen.
Crude oil rose after Iran, the Organization of Petroleum Exporting Countries' second-biggest producer, said it would defy United Nations sanctions and pursue nuclear research. Crude for February delivery rose 25 cents, or 0.4%, to $62.66 a barrel in morning trade on the New York Mercantile Exchange.
Gold futures rose 1.2% to $629.60 an ounce, the biggest climb since November 30 as investors sought the metal as a haven asset after the report from Iran.(News Agencies)