Eye on Reserve Bank as index falls slightly

However, the market outperformed the Asian region for the second straight session, supported by a weaker Australian dollar, which has boosted the outlook for company earnings.

At the close, the S&P/ASX 200 Index was down

5.6 points at 4337.9.

"Our market has held up well considering the weakness which has plagued international markets," said CMC Markets trader Ben Taylor. "While some traders believe we are merely playing catch-up from our recent underperformance, other investors believe the reason for resilience is a pending Reserve Bank rate cut next week."

Japan's market slipped 0.7 per cent, Hong Kong was down 1.2 per cent and China was off 0.6 per cent. The local resilience and weaker sentiment in the Asian region gave speculators an excuse to increase bets that the RBA might cut its benchmark rates to 4 per cent next week.

The strength of the currency has made it hard for manufacturers to compete, denting the earnings of companies with operations in the US and elsewhere.

CMC Markets strategist Michael McCarthy said this week's performance signalled a substantial commitment to Australian equities by investors. "The absolute standout is healthcare," he said. "For the second day in a row it's been the top performing sector and it's been quietly buoyant for the last two weeks."

He said there was an argument that a recent easing in the dollar was pushing up healthcare stocks with offshore exposures, such as CSL, but the strong performance in Sonic Health Care indicated that other factors were at play.

CSL gained $1.15, or 3.3 per cent, to $36.30 yesterday while Sonic rose 9? to $12.52.

Other defensive sectors, including IT, consumer staples, utilities, telcos and property trusts, were also in favour. Telstra firmed 2? to $3.30, Computershare climbed 17?, or 1.9 per cent, to $8.97 and Woolworths advanced 23? to $25.64.

Banks and financials, excluding property trusts, posted gains for the sixth day in a row, with the sector rising 7.5 per cent in the past 15 trading days. Three of the big-four banks advanced but Westpac dipped 6? to $21.88. Bank of Queensland plunged 41?, or 5.4 per cent, to $7.24 as investors digested the effect of its capital raising.

Materials and oil stocks underperformed, with BHP Billiton losing 36?, or 1 per cent, to $34.25, and Rio Tinto down 17? at $64.36.With AGENCIES