Stocks in Tel Aviv have begun the Wednesday sessions with sharp drops. The mood is black after fighting broke out on Israel's border with Lebanon. Rockets were fired this morning from Lebanese territory at Israeli soldiers, coming on top of continuing fighting in the West Bank.

Israel's leaders have been sounding increasingly pessimistic, although Prime Minister Ehud Barak denied that he yesterday ordered the Israeli army to prepare for all-out war. He clarified that he had told the army to step up preparations three months ago. Investors apparently did not find his clarification enough cause for cheer. Nor is Nasdaq's 7.2% drop on Tuesday helping matters.

The Maof-25 index of blue chips is off 3.4% to 468.65 points and the TA-100 index is losing 3.4% to 453.2 points. The Tel-Tech technology index is down 3.8%. The session has kicked off with high total turnover of NIS 30 million.

Teva Pharmaceuticals (Nasdaq:TEVA) is shedding 7.7% on NIS 6 million, the highest turnover of the session. The Toronto, Canada-based pharmaceuticals company Biovail (Toronto:BVF.TO) yesterday announced that its 2001 sales of generic drugs will fall up to 25% short of forecasts. Biovail has a profit-sharing arrangement with Teva on certain hypertension and angina treatments. Biovail produces the drugs, including generic versions of Adalat, Procardia and Aventis, and Teva markets them in the United States. Teva was quick to announce that its sales will not be affected by Biovail's revenues shortfall, and that it does not plan to issue a profit warning. Teva CFO Dan Suesskind said that Teva's sales forecast remains unchanged.