Northern Rock drop-off shakes up global market

The Tel Aviv-25 Index fell on Monday, ending a three-day gain. Africa Israel Investments led real-estate shares lower.

By NEWS AGENCIES
September 18, 2007 08:09
4 minute read.

 
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SHARES TEL AVIV The Tel Aviv-25 Index fell on Monday, ending a three-day gain. Africa Israel Investments led real-estate shares lower. The TA-25 lost 4.16, or 0.4 percent, to 1,058.48. Investors traded about NIS 1.52 billion of shares and convertibles. Africa Israel, billionaire Lev Leviev's real-estate and holding company, dropped NIS 10.90, or 3.1%, to NIS 339.10. Kardan NV, a Dutch-Israeli real estate company, dropped NIS 1.18, or 1.9%, to NIS 60. Elbit Medical Imaging, a medical technology firm turned real-estate developer, fell NIS 1.60, or 0.8%, to NIS 189.40. Northern Rock, the UK mortgage lender bailed out by the Bank of England last week, tumbled to a seven-year low in London trading after customers lined up at branches across the country to withdraw their savings. "What happened in Northern Rock may affect the sentiment at other banks," said Limor Gruber, an analyst with Psagot Ofek Investment House in Tel Aviv. "Banks may demand that loans be returned." And if a real-estate "company needs to sell immediately, they may have to compromise on price." Bank Leumi, the country's largest bank by assets, added NIS 0.45, or 2.8%, to NIS 16.35. Leumi reportedly is considering acquiring a Chinese technology company to enter the country's Internet banking market. Radware, a company whose technology makes Internet networks more efficient, gained NIS 2.20, or 3.7%, to NIS 62.15. The company said it received its biggest order ever from an unspecified foreign government. WALL STREET Stocks dropped as demand for withdrawals from Northern Rock caused global borrowing costs to climb. Citigroup, Bank of America and American International Group led declines among financial companies. Merrill Lynch & Co. fell after announcing job cuts at a mortgage unit. Microsoft retreated after the world's largest software maker lost a European antitrust appeal. The Standard & Poor's 500 Index slipped 10.74, or 0.7%, to 1,473.51 during morning trading in New York. The Dow Jones Industrial Average decreased 60.4, or 0.5%, to 13,382.12. The Nasdaq Composite Index dropped 26.77, or 1%, to 2,575.41. The interest rate banks charge each other for overnight loans increased the most since June as Northern Rock customers lined up to withdraw savings after the bank was forced to seek emergency funding. Investors also pared bets the Federal Reserve will lower its benchmark rate by half a percentage point at its meeting on Tuesday. EUROPE Stocks declined, led by banks. Northern Rock tumbled as much as 41%. Bradford & Bingley and Alliance & Leicester retreated after Citigroup downgraded the banks' shares. Grupo Ferrovial of Spain led a drop in construction-related companies on concern the global economy will slow and reduce demand for building. Europe's Dow Jones Stoxx 600 Index lost 1.5% to 362.18 in London. All 18 industry groups fell. The index has retreated 9.5% since reaching a 6 1/2-year high on June 1 on concern turmoil in the credit markets will hurt earnings growth and spread to the broader economy. The Stoxx 50 declined 1.3%, while the Euro Stoxx 50, a measure for the euro region, slipped 0.9%. National benchmarks fell in all 18 western European markets except for Greece. The UK's FTSE 100 decreased 1.7% to 6,182.80, France's CAC 40 slid 1.8% and Germany's DAX lost 0.2%. ASIA Stocks dropped for the first time in five days after the US Justice Department began investigating makers of flash-memory chips and falling crude prices drove down oil producers. Samsung Electronics, the world's biggest maker of NAND flash memory, fell to its lowest in more than three months. Taiwan Semiconductor Manufacturing slid after chip prices declined. BHP Billiton, the world's biggest mining company, retreated after oil dropped from a record. The Morgan Stanley Capital International Asia-Pacific excluding Japan Index slid 0.9% to 485.48 as of 6:25 p.m. in Hong Kong, halting a four-day, 3.1% rally. A measure of technology shares posted the biggest loss among 10 industry groups. Taiwan's Taiex dropped 1.5%. Benchmarks also fell elsewhere in the region, except for China, South Korea, New Zealand, the Philippines, Pakistan and Sri Lanka. Japan's markets were closed for a holiday. The CSI 300 Index climbed 1.9% to a record in China, where the central bank on September 15 raised interest rates for the fifth time since March. China Life Insurance rose on speculation higher rates will boost insurers' investment returns. CURRENCY The shekel rose to a three-month high of 4.0759 per dollar. The dollar traded at $1.3859 per euro at in New York, from $1.3875 on September 14. It was at 114.84 yen from 115.36 yen at the end of last week. COMMODITIES Crude oil rose on speculation that the Federal Reserve will lower interest rates to bolster the economy of the US, which consumes 24% of the world's oil. Crude oil for October delivery rose 49 cents, or 0.6%, to $79.59 a barrel during morning action on the New York Mercantile Exchange. Gold rose on speculation a credit crisis will spur central banks to reduce interest rates and boost demand for the precious metal as an alternative investment to currencies. Gold futures for December delivery rose $8.20, or 1.1%, to $726 an ounce on the Comex division of the NYMEX.

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