Jul.02, 2012 | 3:53 AM–The Tel Aviv Stock Exchange set a record in trading on Sunday, although one for which it will get no laurels: Turnover fell to just NIS 470.1 million, the lowest level of activity in a single trading day in eight years, not counting Passover eve when turnover was just NIS 320 million in a shortened trading day.

It seemed like no one was around to trade, but those who were there boosted share prices sharply after European leaders agreed in a surprise decision over the weekend to create a mechanism to recapitalize the continent’s ailing banks directly rather than via governments.

European Council President Herman Van Rompuy called the agreement, which represented a major concession by northern European countries, including Germany, a “breakthrough.” The TA-25 index of blue chips rose 2.4% to 1,082.54, with the TA-100 trialing not far behind of a 2.1% increase to 990.51. The TA-Banking index, which is especially sensitive to developments in Europe, jumped 4.6% to 874.44. The Real Estate 15 index gained 2.4%. Among bank shares, Bank Leumi led the way higher, ending up 5.5% by the end of the day. Bank Hapoalim tacked on 4.5%, Israel Discount Bank 3.9% and Mizrahi Tefahot 2.4%. First International Bank of Israel lagged far behind with a rise of just 1%.

But Ayalet Nir, chief economist and strategist at Psagot, said Sunday’s rally is likely to be short lived.

“The crisis is not behind us,” she said. “The plan buys time for these countries until the next crisis. They have reduced the risk of other [sovereign] creditors because the banks can get help without burdening governments. The less positive part of the decisions taken over the weekend do not include mutual guarantees. No decision was made on where the money will come from and governments will be forced to continue contending with the debt crisis while trying to reduce their debt over time.”…Read More>>

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