* Israeli currency inches up after Wednesday's slide
* Shares, bonds extend Wednesday's declines
* Traders blame global weakness as well as Gaza clashes
* Market thinks clashes won't escalate into war, say traders
* Say ground forces' incursion into Gaza would hit prices
By Steven Scheer
JERUSALEM, Nov 15 Israeli shares and bonds
extended losses on Thursday, while the shekel rose off lows as
violence between Israel and Palestinian militants intensified,
though investors doubted the clashes would lead to a
The shekel slid more than 1 percent late on Wednesday
to a two-month low against the dollar after Israel killed the
military commander of Hamas in an airstrike on the Gaza Strip.
Israel said the strike that killed Ahmed Al-Jaabari, who ran
the militant group's armed wing, came in response to more than
100 missiles fired out of Gaza this week.
On Thursday, Israeli warplanes bombed targets in and around
Gaza city with the Palestinian death toll rising to 13, while a
Hamas rocket killed three Israelis in the town of Kiryat
Malachi, 25 km (15 miles) north of Gaza.
The shekel inched up to 3.95 per dollar.
"People don't think the situation will escalate (into a
war). It won't have an effect on the economy," Rony Gitlin, head
of spot trading at Bank Leumi, said.
The currency slid to 3.96 late Wednesday and close to 3.98
early on Thursday, having been fixed at 3.9180 on Wednesday
before the airstrike.
Gitlin said some who did not get to buy dollars on Wednesday
- when the strike caught the market off guard - bought this
morning. But then dollar sellers emerged.
"Today we see offshore banks and local customers enjoying
the high rate of dollar-shekel," he said.
Tel Aviv shares saw gains of 0.5 percent
evaporate into a loss of around 1 percent on the killing of
Al-Jaabari on Wednesday.
The Tel Aviv 100 index fell a further 0.9 percent in
Thursday afternoon trading, with traders attributing most of the
declines to weakness on global markets.
"Investors have a lot of experience with these flare-ups of
violence," said Clal Finances's Saar Golan.
He said investors do not believe company earnings or the
economy will be impacted as most of the country goes on with its
"The market assumes this is a flare-up and not a major
geopolitical change," he said. "If it follows the pattern of
past operations, you will have tit-for-tat violence followed by
some brokered ceasefire and a return to normality."
Golan assumes that of the nearly 2.5 percent decline in the
market since the airstrikes began, about 1 percent was related
to the violence.
But should Hamas fire missiles at Tel Aviv and Israel send
ground troops into Gaza, then prices could fall "a few more
percent," Golan said.
Tel Aviv share indexes are up 7-9 percent so far in 2012
after declines of up to 20 percent in 2011.
The shekel has depreciated by 3 percent versus the dollar
this year. Since the beginning of the month, it had stuck to a
narrow range of 3.87-3.92 to the dollar.
Government bond prices fell as much as 0.6
percent after falling up to 0.6 percent on Wednesday.
Israeli five-year credit default swaps slipped 3 percent to
156 basis points. They have risen more than 9 percent this week
and had been as low as 137 basis points in September.