Tel Aviv Stock Exchange jumps on hopes of aid; unemployment keeps skyrocketing

Tel Aviv Stock Exchange jumps on hopes of aid; unemployment keeps skyrocketing

Bank of Israel head calls for NIS 15b ‘safety net’ for businesses; shekel gains ground against dollar; bonds climb after bank intervention

Luke Tress is a video journalist and tech reporter for the Times of Israel

Jerusalem Municipality workers close the entrances to the Mahane Yehuda market in Jerusalem on March 24, 2020 (Yonatan Sindel/Flash90)
Jerusalem Municipality workers close the entrances to the Mahane Yehuda market in Jerusalem on March 24, 2020 (Yonatan Sindel/Flash90)

The Tel Aviv Stock Exchange jumped on Tuesday after weeks of steady decline as world markets recouped some of their losses amid hopes of financial aid packages aimed at mitigating devastating losses caused by the coronavirus pandemic.

The Bank of Israel has taken a more assertive stance toward boosting the economy in recent days, and US markets climbed on hopes that Congress would agree on a massive fiscal stimulus package.

The Tel Aviv market’s TA-35 index climbed 7.1 percent in Tuesday trading, with banks up 11.2%, oil and gas up 8.2%, led by the Delek Group, which jumped 20.2%. The TA-35 index is down over 21% in the past month.

Israeli bonds rose with the Tel-Bond 20 index of corporate bonds up 3.45%.

The shekel strengthened against the dollar as the exchange rate fell about 1%, with one shekel valued at $3.65.

In New York, the S&P 500 index was up 7.18% in midday trading. Germany’s DAX climbed 9.97%, London’s FTSE100 9.05%, Hong Kong’s Hang Seng 4.46%, and Japan’s Nikkei 7.13%.

Bank of Israel chief Amir Yaron on Tuesday called for a NIS 15 billion ($4.2 billion) “safety net” for businesses.

Yaron said that if the current economic shutdown continues until the end of April, it will cost the economy some NIS 50 billion ($13.9 billion), or 3.5% of GDP. An additional month of stagnation would increase the cost to some NIS 90 billion ($25 billion).

If restrictions are tightened further, and continue until the end of May, the damage could amount to NIS 126.8 billion ($35 billion), Yaron said.

Amir Yaron, governor of the Bank of Israel, attends a press conference in Jerusalem, March 31, 2019. (Yonatan Sindel/Flash90)

“This is the time to support businesses and civilians, so the crisis doesn’t deepen, and to allow businesses and markets to recover from the crisis quickly when the health restrictions are removed,” Yaron said. “Without health, there is no economy, but without economy, there won’t be health.”

The Bank of Israel and Finance Ministry have offered increasingly dire predictions about the virus’s impact on the economy after initially estimate a hit of less than 1% to Israel’s GDP.

The Bank of Israel said Monday that it would buy NIS 50 billion ($13.4 billion) in government bonds on the open market to ease credit conditions and bolster the economy.

The move was the latest in a series of measures by the bank to stabilize the economy as it deteriorates amid skyrocketing unemployment, government restrictions, shuttered businesses, plunging equities and consumer fears.

The bank said it will continue to swap dollars and shekels to keep the currency stable.

The Bank of Israel has been less aggressive in its response to the pandemic than the US Federal Reserve, which slashed interest rates to near zero in a futile attempt to buoy markets.

In its Monday statement, Israel’s central bank appeared to shoot down hopes it would similarly cut interest rates, saying, “The Bank of Israel interest rate has for a long time been at low levels, which makes financial conditions easier for the business sector and households.” Its interest rate currently stands at 0.25%.

Unemployment continued to skyrocket on Tuesday, reaching around 18.6% with 31,146 new registrants for a total of 615,834. The head of the National Employment Service said that 1 million Israelis could be unemployed by Passover in mid-April.

Some 90% of people registering with the service have been placed on unpaid leave and the unemployment service expects 10%-20% of those registered to lose their jobs on a permanent basis when the coronavirus crisis comes to an end.

In government meetings on the shutdown, the Finance Ministry warned that if a total lockdown is applied the economy may not be able to rehabilitate afterwards, according to Channel 12 news. The Finance Ministry estimated last week that the virus will cause damage to the economy of some NIS 45 billion ($12 billion) and wipe out any projected growth.

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