The Australian sharemarket ended its five-day winning streak as investors booked profits ahead of the highly anticipated US Federal Reserve monetary policy meeting next week.
The S&P/ASX 200 index slipped 22.9 points, or 0.44 per cent, to 5219.6 points but finished off its lows as the consensus of economic thought predicted the Fed would announce plans to taper its $US85 billion a month bond purchasing program by between $US10 billion and $US20 billion on Wednesday night.
Gold and base metals were the biggest losers on heightened fears of Fed stimulus withdrawal, with the precious metal slumping 3.2 per cent to $US1323 an ounce overnight, before falling another $US12 to $US1310 an ounce in Asian trade. Copper fell 1.5 per cent overnight to $US7060 a tonne, a five-week low.
Analysts noted that the weak Indian rupee could also be impacting physical demand for gold, with the selling bouts triggered by stop-loss selling.
The Australian dollar was steady at US92.50¢ for most of the session as the US dollar moved sideways against most major currencies, but a late scramble for the greenback pushed the Aussie down to US92.25¢..
However, Australian 10-year government bonds climbed 5 points to 4.09 per cent after US 10 years jumped 6 points to 2.95 per cent.
Overnight the S&P 500 index lost 0.3 per cent, with the US weekly jobless claims data clouding the economic outlook.
The number of claims slumped to a seven year low, but the US Department of Labor said the data was distorted by lack of input from two states conducting computer maintenance.
“If the Fed does commence tapering (as widely expected), we anticipate the FOMC to emphasise that any further adjustment is data dependent and also to adjust the language around the threshold guidance for the federal funds (borrowing) rate,” ANZ economists said.
“In particular, the latter may involve either a lowering of the 6.5 per cent unemployment rate threshold or adding further conditionality such as the participation rate or inflation.”
The Shanghai composite index was off 0.9 per cent at the close of the ASX as traders booked profit at six-month highs.
Attention is now turning to Shanghai interbank lending rates for signs of a repeat to June’s funding stress following the near doubling of shadow bank lending in August.
In Tokyo the Nikkei index was down 0.3 per cent.
IG market strategist Stan Shamu said he thought markets were becoming more comfortable with the fact that tapering of the stimulus would happen.
"The fact that the global economy is recovering is countering the effect of tapering,” he told AAP.
"As long as things are improving then what’s wrong with it? It’s almost positive."
The Australian market was still up more than 1.6 per cent for the week despite falls of more than 0.4 per cent on Friday.
Miners led the market down following falls in the gold price and strong gains of about two per cent earlier in the week.
Gold miner Newcrest Mining recovered from some heavy early falls to close 37 cents, or 1.7 per cent, weaker at $12.02.
The world’s largest miner BHP Billiton gave up 38 cents to close at $36.20 and second-largest Rio Tinto dropped $1.12 to $63.08.
The winners on the bourse on Friday were stocks trading in US dollars after it gained in strength.
Shares in the biggest ASX health company, blood products and vaccines supplier CSL gained 62 cents to $65.90.
It revealed in its annual report today that former boss Brian McNamee had walked away from the top job this year with pay and entitlements worth almost $20 million.
The broader All Ordinaries index was down 23.5 points, or 0.45 per cent, at 5214.7.
The September share price index futures contract was 12 points lower at 5227, with 33,344 contracts traded.National turnover was 1.5 billion securities worth $4.3 billion.