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Israel Stocks Drop on Europe Debt, Syria Concern; Dubai Declines

Israeli shares dropped the most in a week amid concern that Europe’s debt crisis will hamper global growth and as fighting escalated in neighboring Syria. Dubai’s stock index declined.

Cellcom Israel Ltd. (CEL), Israel’s largest wireless provider, tumbled to the lowest close on record. Mellanox Technologies Ltd. (MLNX), a developer of technology used to transfer and store data, lost 3.4 percent following a decline in its U.S.-traded shares. The TA-25 benchmark index dropped 0.6 percent, the most since July 15, to 1,073.11 at the close in Tel Aviv. Dubai’s DFM General Index (DFMGI) fell 1.3 percent.

“The market is following the European and the U.S. market declines on Friday on continued debt concerns on the continent,” said Daniel Rapoport, head of equity and derivatives at Bank Leumi Le-Israel (LUMI) in Tel Aviv. “Liquidity is poor, typical of a Sunday, and we are at the height of summer.”

The Stoxx Europe 600 (SXXP) Index dropped 1.4 percent on July 20, paring its weekly advance, as the yield premium for Spanish benchmark bonds over German bunds surged to a record, sparking concern the euro-area debt crisis is intensifying. Europe accounts for 36 percent of all Israeli goods sent abroad, excluding diamonds. Euro-area finance ministers gave the final approval for the bailout of Spanish banks for as much as 100 billion euros ($122 billion).

Syria Unrest

The yield on Israel’s benchmark 5.5 percent notes due January 2022 declined one basis point, or 0.01 percentage point, to 4.1 percent. The Bank of Israel will probably hold the benchmark interest rate at 2.25 percent tomorrow, according to 25 out of 27 economists surveyed by Bloomberg. Two forecast borrowing costs will fall by 25 basis points.

Israeli Defense Minister Ehud Barak said today the country can’t accept any movement of sophisticated weapons from Syria to Lebanon, where the Shiite Hezbollah is based. The comments came as Syrian rebels fought for control of the country’s border crossings after clashes spread to the city of Aleppo and the escalating 18-month conflict drove thousands to escape to neighboring nations.

Cellcom lost 5.9 percent to 21.3 shekels, the lowest since listing in Tel Aviv in July 2007. Cellcom is the worst performing stock on Israel’s TA-25 Index this year. The country’s mobile phone market has grown enough to ensure sufficient competition in the industry as the government encourages companies to enter the fixed-line and cloud computing markets to augment revenue.

“The number of players in the market is the number we wanted,” Eden Bar Tal, the director general at Israel’s Ministry of Communication, said in a phone interview on July 19.

Ramadan Begins

Mellanox decreased the most since July 18 to 361 shekels, or the equivalent of $90.12. The New York-traded stock dropped to $89.24 last week.

Saudi Arabia (SABIC)’s Tadawul All Share Index (SASEIDX) and Kuwait’s gauge gained 0.5 percent, while Abu Dhabi’s ADX General Index (ADSMI) increased 0.2 percent. Oman’s MSM30 Index (MSM30) lost 0.2 percent, Bahrain’s benchmark stock index slipped 0.4 percent and Qatar’s QE Index (DSM) was little changed. Egypt’s EGX 30 Index was also little changed, gaining less than 0.1 percent.

In the Arab world, the Islamic holy month of Ramadan, when Muslims fast from sunrise to sunset and business slows, has started.

To contact the reporter on this story: Zahra Hankir in Dubai at zhankir@bloomberg.net

To contact the editor responsible for this story: Claudia Maedler at cmaedler@bloomberg.net

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