The Tel Aviv-25 Index climbed the most in two weeks, increasing 9.80, or 1.6 percent, to 641.19 at the close in Tel Aviv.
The index is headed for a 47% decline in 2008, the steepest one-year loss since 1983, amid the worst global financial crisis since the Great Depression.
Kardan NV increased 5%. The Dutch-Israeli investment group said late Monday it would not proceed with a planned merger of its Israeli real-estate activities.
Osem Investments Ltd. rose 1.9%. Maabarot Products Ltd. said its board had approved the acquisition of 51% of Israeli baby-formula maker Materna Laboratories Ltd. by Nestle SA, the world's largest food maker, and its Israeli unit Osem, according to a statement to the Tel Aviv Stock Exchange on Tuesday.
US stocks climbed, recouping Monday's losses, after the government widened its efforts to keep General Motors Corp. out of bankruptcy by shoring up its finance arm. GM rallied as much as 11% as the US Treasury committed $6 billion to support GMAC LLC. Rival Ford Motor Co. jumped as much as 5.4%.
Rohm & Haas Co. gained 10% on speculation Dow Chemical Co. will be forced to complete its acquisition of the maker of paint and coatings. All 10 industry groups in the Standard & Poor's 500 Index advanced.
The S&P 500 increased 1.2% to 879.47 at 2 p.m. in New York. The Dow Jones Industrial Average gained 91.51 points, or 1.1%, to 8,575.44. The Russell 2000 Index of small companies added 1.4%.
The benchmark S&P 500 has plunged 40% in 2008, poised for its worst year since 1931, as the most severe financial crisis since the Great Depression dragged the US, Europe and Japan into the first simultaneous recessions since World War II.
European stocks climbed for a second day, trimming the Dow Jones Stoxx 600 Index's worst annual decline on record, as governments from Washington to Taipei stepped up efforts to boost the global economy.
The Stoxx 600 increased 1.8% to 196.90 as all 19 industry groups advanced. The regional benchmark index has dropped 46% this year on credit-related losses and write-downs at financial firms that topped $1 trillion.
National benchmark indexes gained in 17 of the 18 western European markets. The UK's FTSE 100 rallied 1.7% to 4,392,68. France's CAC 40 added 2.8%. Germany's DAX increased 2.2%.
Asian stocks rose, paring the regional benchmark index's worst annual decline on record, amid speculation governments will step up measures to bolster the global economy and corporate earnings growth.
The MSCI Asia Pacific Index rose 0.6% to 89.42 as of 8:25 p.m. in Tokyo. The benchmark measure has lost 43% this year, the worst performance in its two-decade history.
Japan's Nikkei 225 Stock Average added 1.3% to 8,859.56 in a shortened trading day that was also the last for 2008. The gauge slumped 42% in 2008, its biggest annual decline.
The shekel advanced the most in more than 10 years against the dollar as domestic banks and exporters sold the US currency to book end-of-year gains. The shekel rose even after Bank of Israel Governor Stanley Fischer lowered the benchmark rate to a record 1.75% Monday night, from 2.5%. Exporters exchanged dollars for the shekel, which has weakened 13% from a high of 3.20 in July.
The shekel surged 2.8% to 3.7540 at 5:45 p.m. in Tel Aviv from 3.8600 on Monday, its biggest one-day gain since November 16, 1998.
The dollar declined against the euro and the yen on speculation the Federal Reserve's zero target lending rate will weigh on demand for the greenback.
The dollar slid 1.3% to $1.4113 per euro at 1:54 p.m. in New York, from $1.3927 on Monday, when it reached $1.4364.
Crude oil fell, poised for its first annual decline in seven years, on speculation that US fuel stockpiles are increasing as the recession reduces demand.
Crude oil for February delivery fell 84 cents, or 2.1%, to $39.18 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are down 59% this year. Futures have dropped 73% from a record $147.27 on July 11.
Gold fell for the first time in four sessions on speculation a rally to the highest price since October was overdone. Gold gained 4.4% in the previous three sessions and on Monday touched $892 an ounce, the highest since October 10.
Gold futures for February delivery fell $2.30, or 0.3%, to $873 an ounce at 10:56 a.m. on the Comex division of the New York Mercantile Exchange.