The Australian market got a big reality check last week from two directions.

From offshore there was the fading of the good news from the US profit reporting season and rising worries about a double dip back recession with the US Fed downgrading its view of the US economic recovery.

We also had confirmation that the German economy is growing strongly, but the rest of the eurozone and other economies in the area are weak to middling.

China's growth continues to cool, but there are now just one or two concerns starting to emerge about some industries key to Australia such as steel.

Back home and the June 30 profit reporting season seems to be fading almost before it started with reports from JB Hi-Fi, Telstra and the Commonwealth Bank shocking the market to varying degrees, as did reports from Computershare and James Hardie.

The optimism from solid reports from a number of resource companies, led by Rio Tinto, has gone, replaced by domestic-driven gloom that probably looks a bit overdone.

With around 50 leading companies reporting this week, the gloom will get another outing from investors worried about surprises.

Leighton Holdings, the country's biggest construction company, starts the reporting week on Monday, followed by OneSteel, BlueScope Steel, Westfield, Woodside and Wesfarmers.

The AMP's chief strategist Dr Shane Oliver says shares are now at high risk of having another leg down, particularly as we head into the normally weak months of September and October.

Telstra was the biggest drag on the index last week. It fell 9.5% on Thursday and 11.8% for the week overall as the shares hit a new all time low on Friday of $2.82.

The shares later closed down 2c at $2.92.

The CBA finished the week up 78c at $51.48, Westpac was 31c higher at $22.52, National Australia Bank had added 13c to $23.87 and ANZ ended up 8c at $22.18.

The profit-driven nervousness saw the market have its first down week in five, with a fall of around 2.3%.

Macquarie Equities researchers forecast that local industrial company profits will be down 1.7% for the year to June, with the impact greater for property stocks, where profits are tipped to have fallen by 6.1%. Resources will be up substantially.

The AMP's Dr Shane Oliver says that while its very early days in the June half reporting season "so far the results have been lacklustre".

"Although there were some good results from companies such as Coca Cola and Qantas in the last week, the proportion of companies surprising on the upside so far is 37%, which is down from 49% in the February reporting season, and there has been a preponderance of negative or cautious outlook statements consistent with increased uncertainty regarding the economic outlook."

"However, beyond the likelihood of another round of near term share market weakness we remain of the view that a double-dip recession globally will be avoided and with shares very good value, monetary conditions set to remain favourable and China likely to start relaxing its tightening measures sometime in the in the next few months, shares are likely to stage a decent rally in the December quarter and then through 2011.

"The $A is likely to remain volatile in the short term, particularly with double dip fears persisting and the next interest rate hike in Australia being pushed out, but should rise on a six to 12 month horizon as it becomes clear that the global recovery is continuing (albeit very gradually in developed countries), commodity prices are remaining strong and that Australian interest rates are remaining well above global rates.

"Double dip and deflation worries will keep bond yields low in the short term, but medium term returns are likely to be poor reflecting low yields and excessive public debt levels in many developed countries," Dr Oliver said in his weekly market outlook on Friday.