Tel Aviv Stock Exchange Opens Amid US-Iran Uncertainty and Strong AI Earnings

The Tel Aviv Stock Exchange (TASE) opened with cautious optimism on the back of ongoing uncertainty regarding a US-Iran agreement and strong earnings reports from two AI companies on Wall Street. Oil prices rose 0.5% to $89.5 per barrel, marking six consecutive days of gains, the longest streak since April. Banking stocks were in focus following excellent quarterly results from Bank Hapoalim and Bank Leumi, the latter reporting its highest-ever quarterly profit of 2.83 billion shekels. Conversely, Bank HaPoalim's competitor, Bank HaBeinleumi, saw an 8.5% drop in net profit. Dual-listed stocks showed little impact, with Tower Semiconductor expected to fall about 3% and Camtek to rise similarly. Naix shares rebounded over 3% after a 25% drop in the previous two days.

Yesterday, the TASE 35 index ended slightly higher after a volatile day, while the TASE 90 index continued its downward trend. The banking sector rose 2.5%, contrasting with a 2% decline in the insurance sector, dragged down by Elbit Systems despite its 16% revenue and 28% net profit growth. Investors appeared disappointed due to the stock's high valuation. Energy stocks, including Delek and Tamar Petroleum, led gains amid the global energy price surge. Asian markets showed mixed results, with South Korea's Kospi up 5%, Japan's Nikkei flat, and Hong Kong's Hang Seng down 1%. South Korean chipmakers SK Hynix and Samsung Electronics surged following strong earnings from CorWave and optimistic forecasts from Super Micro.

On Wall Street, futures edged up slightly after a tech-led selloff amid fading hopes for a reopening of the Strait of Hormuz and doubts about a broader US-Iran deal. The S&P 500 fell 0.3%, Nasdaq 0.6%, and Dow Jones 0.2%. Alphabet and Apple shares declined sharply due to restructuring and rising oil prices. An Iranian official reiterated that the Strait of Hormuz would remain closed until Iran's demands are met. Investors await key inflation data today, with July's Consumer Price Index (CPI) expected to show moderate increases, potentially influencing Federal Reserve interest rate decisions.

In Israel's bond market, corporate bonds have shown resilience, outperforming global counterparts due to declining interest rates. However, analysts warn investors may be underpricing risks amid a 20% drop in real estate stocks without a corresponding rise in bond spreads. Moody's upgraded Teva Pharmaceutical's credit rating to Baa3 with a stable outlook, citing successful growth strategies and improved cash flow. The shekel strengthened to 3 per dollar after a recent dip below that level, with future movements tied to US stock market trends and interest rate expectations.

Strategists at JPMorgan raised their S&P 500 year-end target to 8,000 points, citing strong corporate earnings and massive AI infrastructure investments by tech giants. This reflects a 3% increase from last week's close and highlights the growing role of AI in capital expenditures. Other major banks like Deutsche Bank, Citi, and Goldman Sachs also maintain optimistic views on US equities for 2024.