Israeli Stocks Brace for Volatility Amid Election Uncertainty and Global Trends
Translated & summarized from Globes by baba
The Tel Aviv Stock Exchange will reopen following elections, with preliminary results suggesting a potential political deadlock that has caused the Israeli Shekel to weaken against the dollar. Historically, Israeli markets experience initial gains post-election, followed by a dip and then recovery, with increased volatility. Global markets are awaiting the US Federal Reserve's interest rate decision and earnings from tech giants, while oil prices are rising amid de-escalation efforts between the US and Iran. Bond markets show mixed signals, with positive outlooks for US Treasuries but concerns about the Israeli real estate sector.
The story in 6 lines · by baba
- Tel Aviv Stock Exchange to reopen amid election results pointing to potential political deadlock.
- Israeli Shekel weakens against the US Dollar due to election uncertainty.
- Historical data suggests initial post-election market gains followed by a dip and recovery.
- US Federal Reserve expected to hold interest rates steady; tech earnings from Microsoft and Alphabet are due.
- Oil prices rise as US-Iran tensions ease and Saudi Arabia-Iran hold talks.
- Bond markets show mixed trends, with positive US Treasury outlook contrasted by Israeli real estate concerns.
The Tel Aviv Stock Exchange is set to reopen after being closed for elections, with ongoing vote counts indicating a significant lead for the coalition bloc, potentially leading to political deadlock. This uncertainty has impacted the currency market, with the Israeli Shekel weakening against the US Dollar after a strong appreciation the previous day. Foreign exchange-traded funds tracking Israeli stocks, such as BlackRock's EIS, showed a decline in late trading, though the local market's reaction will be clearer upon opening.
Historical data from the Tel Aviv Stock Exchange Research Unit suggests a pattern of initial post-election gains followed by a dip within the first week, before a recovery later in the month. This period typically sees increased market volatility as investors assess the likelihood of government formation and its economic policies. Dual-listed Israeli stocks are expected to open with a slight positive arbitrage gap from Wall Street trading.
Globally, markets are reacting to various economic events. In the US, attention is focused on the Federal Reserve's upcoming interest rate decision, with expectations of rates remaining unchanged. Major tech companies like Microsoft and Alphabet are also set to release their earnings reports, with a particular focus on their cloud business growth and capital expenditure plans amidst concerns about AI-driven debt.
In Asia, South Korean chipmaker SK Hynix reported record third-quarter profits, significantly exceeding analyst expectations and boosting the Seoul stock exchange. Other Asian markets, including Tokyo, Hong Kong, and Shanghai, also saw gains. Meanwhile, oil prices are climbing after recent dips, influenced by diplomatic efforts to de-escalate tensions between the US and Iran, and direct talks between Saudi Arabia and Iran.
In the bond market, U.S. Treasury bonds are projected to yield 7%-8% over the next 12 months, according to J.P. Morgan. French government bonds have shown recovery after recent political and fiscal concerns, supported by a Moody's rating decision. However, a stark contrast is noted in Israel's real estate sector, where rising risk in the banking system is not reflected in the bond market, leading to questions about market perceptions.
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