THE sharemarket finished lower yesterday after weak leads from overseas and stronger than expected inflation data caused investors to err on the side of caution.
The benchmark S&P/ASX 200 Index fell 37.3 points, or 0.8 per cent, to 4505.8.
The market got off to a poor start because of offshore factors and never recovered the losses.
"Overnight [on Tuesday] we saw European markets hit six-week lows, real worries about Spain's spiking borrowing costs impacting investor sentiment and US investors spooked by disappointing earnings," said CommSec analyst Juliette Saly.
"Adding to the downbeat mood, we had ratings agency Moody's downgrading five Spanish regions. None of that has really helped sentiment."
Bureau of Statistics data released yesterday showed a surprise jump in inflation, up 1.4 per cent in the September quarter.
The dollar was the main beneficiary, rising to around US103.13?, up from US102.75? before the announcement.
Ms Saly said that even though inflation came in higher than expected, the Reserve Bank still had a bit of room to stimulate the economy and cut rates next month.
Before the release of the data, Credit Suisse interest rate futures were pricing in a more than 80 per cent chance of an interest rate cut, but shortly after that dropped to 62 per cent.
All the major sectors finished lower. Goldminers were down 2.4 per cent, while energy and materials also weighed on the market, off 1.6 and 1.4 per cent respectively. Telecommunications slipped 0.8 per cent and financials dropped 0.5 per cent.
BHP fell 1.3 per cent to $34.31, while rival Rio Tinto slipped 1 per cent to $57.26. Iron ore miner Fortescue Metals rose 1 per cent to $4.25.
Fairfax Media enjoyed a further rebound, up 7.9 per cent to 41?. The company held its annual meeting yesterday and despite its biggest shareholder, Gina Rinehart, using her voting power to force a first strike against the company's remuneration report, investors believed there was value to be found.
"[Greg Hywood] was talking really tough and Fairfax investors have responded, along with the overall market," Ms Saly said. "We've actually seen Fairfax shares have a massive rebound from those record lows."
Ten Network hit new lows, dropping 8.2 per cent to 28?, as the broadcaster considers a lower offer for its outdoor advertising business, Eye Corp, from private equity investor Champ.
Elsewhere in the media, APN News finished down 4.1 per cent to 35? and News Corp dropped 1.5 per cent to $24.02.