Five things to know ahead of the trading day opening
Trading in Tel Aviv will open against the backdrop of escalating security tensions in the north and south. Dual-listed stocks return with a mixed gap: Tower and Teva will provide support, Camtek and Nice will weigh down. Why are oil prices not soaring despite the blockade in the Strait of Hormuz? The AI effect: huge infrastructure spending is creating inflationary pressure in the US. And also: on the way to a record valuation on Wall Street: the first bank is approaching a market cap of $1 trillion.
Trading review: current reports, trends, indices, stock prices, bonds, foreign exchange, commodities, and analyst recommendations.
1. Stock market
Trading on the Tel Aviv Stock Exchange is expected to open against the backdrop of the security escalation on two fronts, which is weighing on investor sentiment. In the north, there are reports of Hezbollah's attempts to escalate the situation on the ground at Iran's direction in order to sabotage direct negotiations between Iran and the US. In the south, alertness is increasing among forces along the "Yellow Line" in the Gaza Strip against the backdrop of warnings of possible retaliatory fire by Hamas and dozens of violations on its part — developments that increase the risk premium in the local market and delay political contacts in the region.
Dual-listed stocks will return to trading on the local exchange with a moderate positive arbitrage gap of 0.18% in the TA-35 index, receiving support from heavy-weight stocks returning in the green, including Tower (4.14%), Teva (1.63%), ICL (0.24%), and Elbit Systems (0.37%). Other stocks standing out with positive gaps include Kamada (3.32%) and TAT Technologies (4.55%). On the other hand, leading technology and chip stocks are expected to weigh on the indices and limit gains against the backdrop of notable negative gaps in Camtek (5.61%), Nice (4.23%), Palo Alto (3.15%), Nova (0.69%), and Nayax (1.77%).
In Asia, the continent's major stock exchanges are opening the trading week with gains in most leading indices, receiving a strong tailwind from China and South Korea. The KOSPI index in Seoul leads the green trend with a jump of 2.4%, while in Hong Kong the Hang Seng index climbs 1.6% and the Shanghai index rises 0.8%. In Japan, the Nikkei index rises moderately by about 0.3%. Futures on Wall Street point to a mixed trend at the start of the week, with the Nasdaq future rising 0.3% and the S&P 500 future climbing easily by 0.1%, while the Dow Jones index future records a moderate decline of 0.1%.
2. Bond market
The government bond market in Israel recorded a mixed trend on Friday, presenting a picture of stabilization alongside a steep and normal slope in the curve. In the short part, the yield for a one-year bond recorded a rise of about 2.7% to a level of 3.300%, being influenced by expectations for the Bank of Israel's upcoming monetary policy steps against the backdrop of inflation and growth data. On the other hand, in the medium and long parts of the curve, there were price declines in yields (price increases): the 5-year yield fell slightly to 3.579%, the 10-year yield weakened by 0.42% to a level of 3.822%, and the long 30-year yield fell to 4.375%.
3. Commodities and currencies
The shekel currency arrives at the opening of the trading week after an impressive wave of strengthening, showing a rise of about 3.6% against the currency basket since the end of July and trading below the threshold of 3 shekels per dollar (representative rate of 2.9540). In the commodities sector, geopolitical tension in the Middle East reached new heights, the Strait of Hormuz is almost completely blocked, attacks on oil tankers continue, and talks between the US and Iran have reached a dead end. Despite these data, crude oil prices refuse to soar. The price of Brent is trading at a level of about $88.7 per barrel and WTI around $82.3.
4. Macro
The technology sector, which over the years has been a factor in moderating inflation in the American economy thanks to the constant cheapening of electronic products, is changing direction. The massive run of technology giants such as Alphabet (Google), Meta, Amazon, and Microsoft to develop artificial intelligence and build data centers is creating broad price pressures affecting price indices in the US. The price index preferred by the Federal Reserve, the Core PCE, showed an annual rise of 3.7% in the 12 months ending in June — a level higher than the central bank's 2% target.
5. Forecast
The American banking giant JPMorgan Chase is preparing to cross a historic milestone and become the first bank in the world to reach a market cap of $1 trillion. The bank's stock, managed by Jamie Dimon, recorded a jump of 21% in the last three months thanks to record profits that relied on a boom in trading and underwriting activity. After concluding trading at the end of the week with a value of $965 billion, Wall Street estimates that the transition beyond the trillion threshold is a matter of a short time only.
