The Tel Aviv-25 index fell for a second day, led by Bank Hapoalim and Bank Leumi, the country's two biggest banks, after legislation passed to regulate their fees.
The TA-25 Index dropped 1.38, or 0.1 percent, to 1,119.14 in Tel Aviv, as 13 shares fell and 12 gained. Investors bought and sold about NIS 1.8 billion in shares and convertibles.
Bank Hapoalim dropped NIS 0.20, or 1%, to NIS 20.56 and Bank Leumi declined NIS 0.11, or 0.7%, to NIS 16.58.
The law, which will go into effect in 2008, may lead to between $60 million and $120m. in lost commissions for the country's three biggest banks, or as much as 2% of total revenue, Clal Finance Batucha Investment Management wrote in a note.
Israel Chemicals climbed NIS 0.26, or 0.8%, to NIS 34.19. The company that extracts minerals from the Dead Sea to make fertilizers said Monday it agreed to buy US-based Supresta LLC for $352m. to add to its flame retardants business.
Israel Corp. rose NIS 17, or 0.6%, to NIS 3,021. Zim Integrated Shipping Services, an operator of container vessels owned by Israel Corp., said Tuesday it agreed to buy two Japanese freighters for $92m.
NetVision, an Internet service provider, advanced NIS 0.91, or 1.9%, to NIS 49.92. The company completed a deal to form a partnership with Channel 10.
US stocks gained after concerns eased that losses tied to subprime mortgages will hurt financial company earnings and bond yields held near a three-week low.
The stock market on Monday extended its worst weekly decline since March, led by financial shares, on speculation banks will be saddled with losses from securities containing loans to people with poor credit.
The Standard & Poor's 500 Index added 6.12, or 0.4%, to 1,503.86 in midday trade while the Dow Jones Industrial Average gained 81.04, or 0.6%, to 13,433.09 and the Nasdaq Composite Index increased 7.61, or 0.3%, to 2,584.69.
European stocks dropped for a fourth day on speculation central banks will keep raising interest rates. Europe's Stoxx 600 lost 0.6% to 389.51. National benchmarks decreased in all of the 18 western European markets except for Iceland, Ireland and Portugal. France's CAC 40 slid 0.8%, Germany's DAX lost 0.9% and the UK's FTSE 100 fell 0.4% to 6,559.30.
China's CSI 300 Index gained, reversing earlier losses, as investors judged as excessive a tumble of as much as 12% from its closing high a week ago. The dollar-denominated Morgan Stanley Capital International Asia-Pacific Index added 0.1% to 152.98 in Tokyo. More than three stocks declined for every two that rose. Japan's Nikkei 225 Stock Average lost 0.1% to 18,066.11. Benchmarks fell also fell in Australia, New Zealand, Hong Kong, South Korea, Taiwan, Malaysia and Singapore, whose Straits Times Index slid 1.5%, the most in the region.
The shekel fell to its lowest in almost five months as investors switched into the dollar and foreign bonds and the Bank of Israel said it will keep its interest rate unchanged. The shekel fell to 4.2630 per dollar in Jerusalem, from 4.2472 Monday.
The shekel has lost about 8.4% against the dollar since mid-May, reversing a climb that took it to a nine-year high six weeks ago.
The yen gained the most in more than two months versus the dollar after Japanese Finance Minister Koji Omi said investors were taking risks in one-way bets against the currency. Against the dollar, the Japanese currency climbed as much as 0.7% to 122.81 in New York, from 123.67 Monday. The yen rose to 166.10 per euro, from 166.49 Monday.
The dollar pared earlier gains and was little changed at $1.3467 against the euro, from $1.3463 Monday.
Crude oil fell more than $1 a barrel on forecasts that an Energy Department report will show US oil and fuel inventories rose. Crude for August delivery fell $1.30, or 1.9%, to $67.88 a barrel on the New York Mercantile Exchange.
Gold fell to a three-month low on speculation investors will seek higher returns from US Treasury bonds. Gold, which bears no interest, has slumped 4.4% since June 1 while yields on the benchmark 10-year note remained above 5% after reaching a five-year high of 5.327% on June 13.
Gold futures for August delivery fell $7.40, or 1.1%, to $647.30 an ounce on the Comex division of the NYMEX. (News agencies)