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Tel Aviv stocks stumbled Wednesday on a combo knockout of Tuesday's falls on Wall Street, the datum that the U.S. industrial product had contracted by 0.3% in August - and Standard and Poor's downgrade of Israel's biggest banks, which also sent the shekel reeling against the dollar.

Trade had been somnolent enough on the cool U.S. response to Iraq's offer to let the weapons inspectors return. Stocks were hovering below the flatline on low turnover as exchanges around the world dipped on the U.S. figures. But the news that Standard & Poor's had downgraded Israel's biggest banks sent the banking index diving almost 4%, dragging down the blue-chip indices.

The Maof-25 index finished down 3.1% to 364.3 points and the TA-100 index sagged 2.6% to 354.1 points. The Tel-Tech-15 index was no shelter, losing 2% to 188.5 points. Total turnover was thin at NIS 193 million.

The big banks had been dipping in the morning after a booster Tuesday, when the press reported expectations of higher bank profits in 2003 as Israeli companies shift to publishing financial statements using nominal not inflation-adjusted figures. But the S&P frown changed the dip to a dive. The rating agency cut both

Bank Hapoalim (TASE:


) and

Bank Leumi (TASE:


) to triple-'B'-plus from single-'A'-minus, while affirming its 'A-2' short-term ratings on both banks. It also lowered its public information (pi) rating on

Israel Discount Bank (TASE:


) to double-'Bpi' from triple-'Bpi', but left

United Mizrahi Bank (TASE:


) untouched.

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Bank Hapoalim ended down by 5.1% and Bank Leumi tumbled by 3.3% on NIS 16 million turnover. The fact that S&P did not change the rating of Mizrahi helped not at all. It also lost 3%, and Bank Discount dropped by 2.9%.

First International Bank's chief economist, Hezi Gutman, wrote in his weekly economic review yesterday that the low August consumer price index it dropped 0.4% - is the first indication that inflation is stabilizing. He also predicted that the Bank of Israel would loosen the monetary reins a tad in October and November, by 0.2% in each month.

However, the bond market is hopping after TheMarker disclosed that Finance Ministry director-general Ohad Marani is concerned about the government missing its updated deficit target, of 4.9% of GDP. Although the government would accordingly cap its spending, Marani assured, long-term Shahar bonds dropped as much as 0.8%, to yield levels of 10.12% a year.

Trade in

Mivtach Shamir Holdings (TASE:


) was tumultous. The share gained 1.2% on huge turnover of NIS 12.4 million. Almost 10% of the company's total outstanding share capital changed hands today.

Mivtach Shamir shares have been intensely lively in recent days on deals by substantial shareholders. In one transaction, controlling shareholder Meir Shamir and

Ashtrom Industries (TASE:

) bought the holdings in Mivtach from

Clal Industries and Investments (TASE:


) at a premium of 15% above the market.

Mivtach Shamir also sold its holdings in

Alony Hetz Properties & Investments (TASE:


) for NIS 55.6 million, which will bring it an NIS 11 million capital gain.

Teva Pharmaceuticals



) was in the spotlight after the market learned that its rival, the Indian company Ranbaxy Laboratories, has received the United States Food and Drug Administration okay to market Augmentin in the United States.

Augmentin is a blockbuster penicillin-group antibiotic that its inventor, GlaxoSmithKline, is desperately trying to protect through conventional and unconventional means, including accusing generic drugmakers of using stolen bacteria to manufacture it. Whatever the chances of that lawsuit, Ranbaxy's win of FDA approval is sorry news for the Israeli drugmaker, because by the time it gets permission to market the $2 billion a year drug itself it may have lost vital market share to its rival. Novartis' generics unit Geneva also has permission to sell generic Augmentin, or more precisely amoxicillin and clavulanate potassium, in the United States.

All that had Teva losing 0.8% today on hefty turnover, despite announcing several FDA approvals this month, including for obsessive compulsive disorder treatment fluvoxamine maleate.