Global markets fall; real estate shares lead Tel Aviv retreat

Israeli shares followed a global retreat in stocks on renewed concern the US subprime-mortgage rout will slow economic growth.

SHARES TEL AVIV Israeli stocks dropped for a second day Tuesday, led by Africa Israel Investments Ltd. and Kardan NV. The TA-25 Index lost 4.06, or 0.4 percent, to 1,071.46 at the close in Tel Aviv. Investors traded about NIS 1.25 billion in shares and convertibles, 34% less than the average trading volume in the first six months of 2007. Israeli shares followed a global retreat in stocks on renewed concern the US subprime-mortgage rout will slow economic growth. "The markets in Israel traded flat and negative throughout most of the day, with not much interest," said Daniel Rappoport, a trader at Leader & Co. Ltd. "The negative opening in the US didn't help the market." Africa Israel, the holding company controlled by diamond billionaire Lev Leviev, fell NIS 9.4, or 2.5%, to NIS 361.70. Kardan NV, the Dutch-Israeli company with stakes in real estate and financial institutions, dropped NIS 1.5, or 2.6%, to NIS 56.51. Azorim Investment Development & Construction Co. fell NIS 0.85, or 2.1%, to NIS 39.15. The Israeli real estate company said merger talks ended with Dankner Investments Ltd., a unit of Delek Real Estate Ltd. Starlims Technologies Ltd. climbed NIS 1.8, or 3.8%, to NIS 49.46. The maker of laboratory information management systems won a $1 million contract to supply its software to a pharmaceutical division of a Fortune 500 company, according to a statement filed to the stock exchange. The division wasn't identified in the statement. WALL STREET US stocks declined for a second day after home prices fell the most ever and Merrill Lynch & Co. analysts said tighter credit markets will hurt earnings at banks. Citigroup Inc., Lehman Brothers Holdings Inc. and Bear Stearns Cos. retreated after Merrill lowered its recommendation on the shares and cut its profit estimates. Lennar Corp. and D.R. Horton Inc. led homebuilder stocks to the lowest since May 2003. The Standard & Poor's 500 Index decreased 19.22, or 1.3%, to 1,447.57 midday while the Dow Jones Industrial Average lost 149.41, or 1.1%, to 13,172.72 and the Nasdaq Composite Index dropped 35.4, or 1.4%, to 2,525.85. Wall Street extended its retreat as investors cautiously awaited minutes from the Federal Reserve's last meeting that could provide insight into whether it may cut rates There was little news to affect trading. But the market's overall difficult mood since the turbulence of earlier this month coupled with light volume helped skew price swings - especially ahead of the Fed report. "There's no real reason why we've dropped as steeply as we have. You're seeing incredibly light volume amid continuing credit and housing concerns," said Ryan Larson, senior equity trader with Voyageur Asset Management. "You're not seeing enough buyers around to support these levels, and stocks are just going to trickle to the downside." He and other analysts said the market is waiting to hear what came out of the central bank's August 7 meeting, when policy-makers held rates steady and said that although tight credit and the housing market may drag on the economy, inflation remains its predominant concern. The market has since tumbled further from record levels of mid-July and the Fed, raising worries about the market turmoil's effect on the economy, lowered the discount rate, the interest it charges banks. Although the Fed has indicated since the meeting it will take the steps needed to contain damage to the economy from market turbulence, investors nonetheless may shudder if the Fed's minutes suggest it is unwilling to waver in its stance against inflation. Policy-makers will next meet on September 18, when economists project they will move to cut rates. The Conference Board's report that consumer confidence sagged in August amid volatile financial markets and ongoing housing problems added to the downbeat mood on the Street. Keeping alive credit worries, a Standard & Poor's housing index showed that US home prices in the second quarter posted the sharpest decline since 1987, when the index was started. Fixed-income investors were encouraged by the consumer confidence report, which could indicate the Fed will be more likely to lower rates at its September meeting. Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 4.54% from 4.57% on Monday. EUROPE Shares snapped a seven-session winning streak with sizable losses, with Barclays pacing a decline in the banking sector prompted by worries about exposure to ongoing credit-market woes. The pan-European Dow Jones Stoxx 600 index ended 1.7% lower at 364.66, weighed down by losses in the real estate sector, where credit fears also are impacting, as well as in bank shares. The French CAC-40 index skidded 2.1% to 5,474.17 and the German DAX 30 index drifted down 0.7% to 7,430.24. The UK's FTSE 100 index, after a three-day break, slumped 1.9% to 6,102.20. ASIA Most indexes ended lower in volatile trading, taking their cue from a weaker Wall Street. The decline in Japan was led by automakers such as Nissan Motor Co., which reported a drop in monthly sales. Hong Kong stocks fell as investors booked profits in China-related issues. Japan's 225-issue Nikkei Stock Average slipped 0.1% to 16,287.49, while the broader Topix index fell 0.2% to 1,584.60. In Hong Kong, the Hang Seng Index ended down 0.9% at 23,363.76, after finishing at a record Monday on hopes of strong fund inflows from retail investors in China. The 41-issue Hang Seng China Enterprises Index dipped 0.3% to 13,949.65, snapping a six-day winning streak. China's Shanghai Composite overcame intraday volatility to set another record closing high, its seventh in as many sessions. It ended at 5,194.69, up 0.9%. India's Sensex also closed higher, for the third straight session, despite intraday volatility, on gains in diversified Reliance Industries as well as software firms. CURRENCY The shekel traded at 4.1327 late Tuesday, compared with the Bank of Israel fixing of 4.1250, and 4.1502 late Monday. The yen advanced the most in almost two weeks against the dollar and euro as speculation banks will report more credit-market losses pushed traders to reduce riskier investments funded by loans in Japan. The yen rose 0.9% to 114.83 per dollar early afternoon in New York, and increased 1% to 156.57 per euro. The dollar strengthened to $1.3634 per euro from 1.3647 Monday, after earlier declining to as low as $1.3680 following a report showing German business confidence fell less than forecast in August. COMMODITIES Crude oil for October delivery was off 41 cents at $71.56 a barrel in late morning trade on the New York Mercantile Exchange. Oil prices fell last week on credit worries and as Hurricane Dean missed US oil facilities in the Gulf of Mexico. They have rebounded in recent days, though, due to refinery problems and strong gasoline demand. Gold futures for December delivery fell $4.20, or 0.6%, to $672 an ounce on the Comex division of the NYMEX.