The sharemarket fell for the first time in seven trading sessions after a jump in China's money market rate.
At the close on Wednesday, the benchmark S&P/ASX 200 Index was down 17 points, or 0.32 per cent, at 5356.1. The broader All Ordinaries was down 14.4 points, or 0.27 per cent, at 5356.8.
Concerns about a lack of funds in China's banks overcame a buoyant mood in early trade.
"There's a concern that the reason for the jump may be an attempt by Chinese authorities to withdraw liquidity from the system and cool down this shadow banking system of theirs and the property market," CMC analyst Ric Spooner said. "It can cool the business and small-business sectors in particular and our economy is particularly exposed to China."
Early trading gains were sparked by weak US jobs numbers, which added to expectations the US Federal Reserve's stimulus measures would continue until next year.
But by the end of the session, the banks had dragged the market lower. Westpac dropped 24¢ to $33.87, ANZ was down 26¢ at $31.97, Commonwealth Bank shed 15¢ to $74.61 and National Australia Bank was 60¢ lower at $35.47.
That offset gains by some of the miners, particularly BHP Billiton, which rose for a third consecutive day, adding 45¢ to $37.50. Rio Tinto dropped 32¢ to $63.65.
AGL Energy lost 28¢ to $15.30 after it said it expected to take a $25 million to $30 million hit to its full-year profit due to an unusually warm winter.
Rival energy provider Origin gained 21¢ to $14.46 after it announced managing director Grant King's tenure had been extended.
Gold was at $US1338.68 an ounce, up $US21.18.
The dollar was trading lower despite a strong rally following the release of higher than expected inflation figures. At 5pm on Wednesday it was at US96.53¢, down from US96.55¢. It had earlier hit a five-month high of US97.58¢ after the release of the September-quarter consumer price index figures.
Bond futures prices moved higher when the latest US non-farm payrolls report showed the US economy added 148,000 jobs in September, well below the gain of 180,000 the market was expecting.
The data increased expectations the US Fed would hold off on winding back its economic stimulus program until next year.