The local bourse has snapped its winning streak, falling for first time in five sessions ahead of another key monthly inflation readout in the United States.
The benchmark S&P/ASX200 index on Thursday closed down 35.3 points, or 0.5 per cent, to 6964, while the broader All Ordinaries declined 41.7 points, or 0.58 per cent, to 7145.7.
State Street Global Advisors SPDR ETF equity strategist Julia Lee said nerves were frayed ahead of the monthly inflation readout as well as historic drops in the crypto market.
The US consumer price index data will be released shortly after midnight AEDT on Friday, and the readouts have been driving the market most of the year because they are seen as a key factor in determining the pace of the Federal Reserve's aggressive interest rate hiking campaign.
"The market is looking for signs that the worst is priced in," Ms Lee said. ""Any softness in inflation will be seen as an indicator for lower peak interest rates."
Ms Lee expected consumer price increases would likely have eased in October after coming in hotter than forecast 10 out of the last 12 readouts.
A cooling of US inflation would be positive for markets and a negative for the US dollar, while a plus for the Australian one, Ms Lee said.
There had also been wild swings in the crypto market as leading global exchange Binance walked away from a deal to buy rival exchange FTX and save it from possible insolvency.
Bitcoin fell 8.9 per cent overnight to $US16,700 ($A26,000), its lowest levels since late 2020.
The ASX's losses would have been sharper if not for an $18.4 billion takeover offer for Origin Energy by a consortium led by Brookfield Asset Management.
The alternative investment manager has floated a figure of $9 a share, sending Origin stocks soaring 34.8 per cent to $7.83. Origin said if Brookfield extends a binding offer after completing eight weeks of due diligence, its board would recommend shareholders accept it.
The energy sector was the worst-performing, dropping 2.1 per cent after a fall in oil prices overnight following news of a build-up of commercial crude oil supplies in the US.
Woodside fell 2.3 per cent to $37.98 and Santos dipped 1.6 per cent to $7.52 as Brent crude fell to a two-week low $US92 a barrel.
Losses for coalminers continued for a second day following Whitehaven's caution that flooding from La Nina would hamper production at its open-cut mines in NSW.
Whitehaven was down 3.3 per cent to $8.33 while New Hope dropped 4.7 per cent to $5.31 and Stanmore fell 6.7 per cent to $2.66.
The mining sector was down 1.2 per cent, with BHP dropping 1.5 per cent to $40.56, Fortescue Metals down 2.0 per cent to $16.78 and Rio Tinto down 0.3 per cent to $98.30.
The heavyweight financial sector also didn't fare well, down 0.9 per cent amid losses for all the big retail banks.
NAB dropped 2.1 per cent to $31, ANZ fell 1.1 per cent to $24.28, CBA dipped 0.7 per cent to $104.04 and Westpac dropped 0.5 per cent to $23.61.
Perpetual climbed 14.8 per cent to $33.40 after Regal Partners increased its takeover bid to $33 per share, despite Perpetual already having agreed to be taken over by Pendal.
Pendal dropped 10.9 per cent to $3.91 and Regal gained 4.2 per cent to $3.01 as Perpetual proposed delaying a court hearing on Pendal's offer.
In tech, Xero fell 10.9 per cent to a two-and-a-half-year low of $64.74 after the Kiwi cloud accounting software company missed first-half earnings expectations and disclosed CEO succession plans. Sukhinder Singh Cassidy will succeed Steve Vamos when he retires in February.
On the flip side, Computershare gained 4.1 per cent to finish at an all-time closing high of $27.07 after the share register company upgraded its guidance at its annual general meeting.
Computershare now expects to make $800m in full-year margin income, $280m more than previously forecast.
The Australian dollar had also lost ground, buying 64.16 US cents, from 64.99 US cents at Wednesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index on Thursday dropped 35.3 points to 6964, a 0.5 per cent fall.
* The broader All Ordinaries dropped 41.7 points, or 0.58 per cent, to 7145.7.
One Australian dollar buys:
* 64.16 US cents, from 64.99 US cents at Wednesday's close
* 93.78 Japanese yen, from 94.60 yen
* 63.98 euro cents, from 64.49 euro cents
* 56.32 British pence, from 56.26 pence
* 109.23 NZ cents, from 109.41 NZ cents