Market flat on Spain rating, local woes

For the week, the S&P/ASX 200 Index fell 4.4 points, to 4362.1.

The first half of the week was all about inflation, with the consumer price index up by just 0.1 per cent for the first three months of the year.

The result fell short of economists' expectations, leading most to tip the Reserve Bank would cut the cash rate in response by 25 basis points next week, followed by a cut of the same amount a month later.

Fund managers said some stocks had benefited from all the talk of interest rate cuts. "I think the property sector, Telstra and the banks have been well supported recently by expectations of lower interest rates, said SG Hiscock & Company portfolio manager Rob Tucker. "Lower cash rates suggest investors look elsewhere for higher yielding assets.

"Telstra's had a good run the last three days after that inflation figure, which is seeing ongoing support for cash-flow certainty, particularly from offshore investors, where across Asia, Telstra ranks as one the highest-yielding stocks in the region."

Sizeable profit downgrades by Seven West Media and JB Hi-Fi came to dominate the business news cycle as the week wore on.

JB Hi-Fi shares yesterday fell to their lowest in three years after the retailer forecast full-year earnings as much as 16 per cent below estimates.

Analysts said "confession season" had come early this year.

"The deterioration for some domestically exposed companies has been so material that they couldn't wait until the typical confession season to say that it's happening," said an equity strategist with Bank of American Merrill Lynch, Josh Kirkwood.

Australian Stock Report's head of research, Geoff Saffer, said yesterday that encouraging leads from US markets were not enough to buoy the local market.

"The market started positively this morning but S&P's downgrade of Spain put a dampener on proceedings," he said.

"The market spent most of the day in mildly negative territory and trading was reasonably subdued."

Standard & Poor's lowered Spain's long-term credit rating by two notches, saying its budget problems were likely to worsen as a result of the weak economy.

The utilities sector was yesterday's best performer, up

0.6 per cent. Energy and mining stocks were among the weakest.

Global miner BHP Billiton shed 21? to $35.89 and Rio Tinto dumped 73? at $65.43.

In the retail sector, Harvey Norman fell 5? to $2.02, and Myer fell 7? to $2.32.

In the banking sector, Macquarie Group was 84? higher at $29.27 despite full-year profit falling 24 per cent.

Telstra finished flat at $3.51 after winning an appeal in the Federal Court.