TA Stock Exchange falls after S&P cuts US credit rating

Sharp drops expected after downgrading, subsequent falls on global markets; TASE down 6.5% within hour of opening; shekel weakens.

Tel Aviv Stock Exchange TASE 311 (R) (photo credit: Gil Cohen Magen / Reuters)
Tel Aviv Stock Exchange TASE 311 (R)
(photo credit: Gil Cohen Magen / Reuters)
There was enormous tension Sunday morning on the Tel Aviv Stock Exchange, the first market to open worldwide after S&P announced that it was downgrading the US credit rating from AAA to AA+. The TASE was expected to fall sharply both because of the downgrading but also because of losses on global markets Friday when the Israeli exchange was closed. The Tel Aviv 25 Index was down 6.5 percent in the opening hour to 1079.13 points.
Last week the TASE had its worst week since 2008 with the Tel Aviv 25 Index losing 6.3%. Sunday morning's falls were the Israeli markets eighth straight day of losses.
European stocks see biggest weekly fall since 2008
Steinitz: Lowered US credit rating is a warning sign
Finance Minister Yuval Steinitz reportedly consulted with economic experts Saturday night and decided to close the stock exchange should the falls reach panic proportions.
Steinitz and Bank of Israel Governor Stanley Fischer released a joint statement on Saturday night, in which they said that the consequences of the fall in global markets were still unclear, but promised that they were following all developments and were prepared to use all the tools at their disposal if needed to rescue the economy.
“It must be pointed out that the Israeli economy is doing well from a macroeconomic perspective and the influence of the global debt crises on it has been limited until now, thanks to the macro steadfastness that was attained, among other things, by the budgetary discipline of the past few years,” the two said. They released the statement after an emergency meeting with officials from their office and from the stock exchange.
On Sunday Steinitz discussed the pressure on Israeli markets in relation to ongoing demonstrations over the cost of living, telling Army Radio that “the government cannot respond to all these demands.”
Calling the demonstrations of at least 300,000 people the previous night “impressive,” Steinitz said, “Just as we have been attentive to public sentiment and to the fight over the cost of living and housing prices, so too the public must be attentive to what is happening in the world.
“We are still navigating the Israeli economy through difficult times. We must be responsible and act cautiously,” he said. “Countries that lived beyond their means are today paying the price. We do not want to be in the situation that Greece, Spain and others find themselves in today.”
Against the backdrop of the crisis, the shekel continued to weaken Sunday. On Friday the shekel dollar exchange rate climbed up 0.89% at NIS 3.52/$ and the euro was up 0.11% at NIS 4.979/€.
The shekel continued to weaken Sunday in options trading. The shekel dollar exchange rate was up 0.5% in options trading at NIS 3.538/$, and the shekel euro exchange rate was up 0.58% at NIS 5.008/€.