Dramatic week for investors: On Wednesday, the Consumer Price Index will be published in Israel and the US Federal Reserve (Fed) will announce the level of interest rates in the US.
While investors are waiting for the announcement of the interest rate cut, the sharp declines recorded at the opening of trading in Tel Aviv continued to moderate today and the leading indices closed with relatively moderate declines - the Tel Aviv 125 index decreased by 0.9%, the Tel Aviv 35 index decreased by 1.25% and the banks index dipped by 2 .1%.
Meanwhile, the collapse of the US stock markets continues. Trading opened sharply, the Nasdaq fell 3.2% and the S&P fell 2.6%.
On the other hand, against the background of the declines, the dollar actually jumped against the shekel by about 2% and its representative rate was set at a level of NIS 3.44.
The price declines in Israel are a response to the collapse that occurred over the weekend on the Wall Street Stock Exchange after the publication of US inflation data that surprised investors and increased their fears that the Federal Reserve will be forced to raise interest rates sharply.
The US consumer price index jumped in May by a percentage point and completed an increase of 8.6% in the last year while economists forecast a more moderate increase, of 8.3%.
This is the sharpest annual jump in the level of inflation in 41 years.
The rise in the US index was affected by the jump in prices of three main components - housing, food and fuel.
Are preparing to raise interest rates
Following the release of inflation data on Friday, interest rate market forecasters are already predicting a 0.5% rise in US interest rates that will continue in the coming months until interest rates reach 3.5% in February 2023. This rate of increase is considered very sharp - until three months ago US At zero level.
The sharp declines in the US stock market are primarily affecting the technology industry - so while the NASDAQ has crashed more than 28% since the beginning of the year, the S&P and Dow Jones have lost "only" 18% and 14% respectively since the beginning of the year.
The declines in the US have flowed to most of the world's leading indices and have recently reached Tel Aviv as well.
Alex Zabzinsk, chief economist at Meitav Dash: "Estimates are growing that interest rates will rise", Photo: Yachz
Expected strong uptrend
"The straw that broke the camel's back was the publication of inflation data in the United States," Alex Zabrzynski, chief economist at Meitav Investment House, explained in a conversation with Israel Today. 1%.
This week, the US Bank will announce the level of interest rates in the economy, and following the high index, estimates are growing that the interest rate could also rise by 0.75%. "
Zabrzynski also referred to what was happening in Israel and said: "The Bank of Israel also referred to inflation that exceeds the target. Regarding the dollar-shekel ratio, the current jump is explained by the response to declines in stock markets.
In addition, there is an 'investor run' for the dollar, which was perceived as a safe asset at the time of the declines. "
How long will the declines in the markets last?
The answer to the question of how long the declines will last, is unknown to anyone.
Eyal Reuven, CEO of Tower Investment Solutions at Migdal Capital Markets, estimates: "In our estimation, the declines will continue at least throughout the coming quarter.
According to Reuben, "We are seeing a sharp correction in markets whose source is an inflationary move that is happening all over the world. We are seeing particularly sharp price declines in the technology sector which is actually pricing tomorrow. Why re-pricing? Because risk-free interest rates are rising today."
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