Israeli Markets Brace for Election Day Amid Global Volatility
Translated & summarized from Globes by baba
The Tel Aviv Stock Exchange is expected to open lower, influenced by sharp declines on Wall Street and rising geopolitical tensions in the Middle East that are boosting oil prices. Investors are also awaiting Israel's upcoming elections on Tuesday, which will halt trading. Dual-listed Israeli stocks, particularly in the semiconductor sector, are showing negative gaps, while some larger companies offer slight support. Global markets are mixed, with US futures indicating a negative start, and bond yields have seen significant volatility.
The story in 7 lines · by baba
- Israeli markets face opening declines due to Wall Street drops and Middle East tensions.
- Semiconductor stocks like Tower, Camtek, and Nova show significant negative gaps.
- Global markets are mixed, with US futures pointing to a negative start.
- Oil prices surge amid fears of a wider regional war impacting energy supplies.
- US embassy staff evacuated from Saudi Arabia due to increased Houthi attacks.
- Bank of Israel holds interest rates steady, signaling unlikely future cuts.
- Investor Rob Arnott warns against overestimating long-term AI tech giant dominance.
The Tel Aviv Stock Exchange is set to open amidst significant global and regional pressures. Wall Street experienced sharp declines, driven by concerns over AI spending and geopolitical tensions in the Middle East, which are also fueling oil price surges. The upcoming Israeli elections on Tuesday, which will halt local trading, add another layer of uncertainty.
Dual-listed Israeli stocks are expected to open with a weighted arbitrage gap of approximately 0.48% negative on the TA-35 index. Semiconductor stocks are particularly affected, with Tower Semiconductor returning with a significant negative gap of 5.5%, Camtek at 2.2%, and Nova at 1.3%. Conversely, some major stocks like Teva, Nice, and Elbit Systems are showing slight positive gaps, potentially offering some support.
Last week, the Tel Aviv Stock Exchange closed negatively, capping a mixed trading week. The TA-35 index fell about 1.1%, and the TA-90 index weakened by 0.4%. These declines mirrored global market sentiment, influenced by AI company debt concerns, turmoil in France, and fears of escalating conflict with Iran.
Globally, Asian markets are largely negative, following Wall Street's lead. Japan's Nikkei is down 0.7%, South Korea's Kospi 0.8%, and China's Shanghai Composite 0.5%. Hong Kong's Hang Seng is a bright spot, up 0.7%. US stock futures indicate a slight negative trend ahead of the opening, with Dow Jones futures down 0.3%, S&P 500 futures down 0.1%, and Nasdaq futures marginally lower.
The bond market has seen unusual volatility, with investors seeking safe havens, leading to the sharpest daily drop in yields since March 2023. The 10-year US Treasury yield fell about 19 basis points to around 4.95%, retreating below the 5% mark. This flight to safety is attributed to Middle East escalation, French instability, and growing doubts about AI valuations.
Commodity markets are dominated by rising oil prices, with Brent crude exceeding $114 per barrel, driven by fears of a wider regional war impacting energy supplies. The US State Department ordered non-essential personnel and their families to evacuate the US Embassy in Saudi Arabia due to increased Houthi attacks. Gold prices have fallen amid rising inflation concerns fueled by energy and shipping costs.
Domestically, the Bank of Israel maintained its interest rate at 3.25%, with economists suggesting further rate cuts are unlikely due to Shekel depreciation and expected inflation increases. Historically, the Israeli stock market has shown a pattern of consolidation before elections, followed by gains afterward.
Billionaire investor Rob Arnott warns that the market may be overestimating the long-term dominance of AI tech giants, citing historical precedents where past leaders failed to maintain their edge. He suggests that the broader economy and end-users will benefit more from the AI revolution than the innovators themselves, and advises shifting investments towards undervalued smaller companies.
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