JERUSALEM, Nov 2 (Reuters) - Israeli financial markets were marginally lower on Wednesday after partial results from Tuesday's election showed former prime minister Benjamin Netanyahu poised to make a comeback.
The dollar was up 0.1% against the Israeli shekel at a rate of 3.54, while main Tel Aviv share indices were unchanged to 0.1% lower. Government bond yields were narrowly mixed.
With roughly 70% of votes counted, Netanyahu's conservative Likud party and its likely religious and far-right allies were on pace to control a majority in parliament after Israel's fifth election in less than four years.
Yonie Fanning, chief strategist at Mizrahi-Tefahot Bank's Finance Division, still believes markets would likely benefit from Netanyahu's victory due to "political certainty" after years of stalemate that culminated with a prior government that lasted one year, in which Netanyahu was in the opposition.
Until the 2022 budget was approved last year, Israel had not had a budget since 2019. A 2023 budget is unlikely until at least early next year.
The Tel Aviv 125 index was 0.2% percent lower in late morning trading, pushing losses to 5% so far in 2022. The shekel has weakened 14% against the dollar this year.
Fanning said the new government would boost fiscal spending after low spending in recent months and as Israel's budget was now in surplus and the debt burden had fallen.
"Some pick-up of inflation expectations may be warranted, more so given the demand for wage gains at the public sector," he said, adding the Bank of Israel would remain cautious.
Fanning said that the shekel would mainly be influenced by local natural gas production and the export of high-tech services.
As vote counting continued, Netanyahu, who is on trial on corruption charges he denies, looked to lead a bloc of four parties taking 67 of the Knesset's, or parliament's, 120 seats. (Reporting by Steven Scheer Editing by Ari Rabinovitch and Nick Macfie)
