Market steps back from five-year high

The sharemarket has retreated from its five-year highs as the countdown begins for the US Federal Reserve's September meeting when the central bank is widely expected to start trimming its massive stimulus program.

The benchmark S&P/ASX 200 dipped 0.4 per cent on Friday, ending five consecutive days of gains, which pushed the index to levels not seen since before the financial crisis.

For the week, the sharemarket was still up 1.6 per cent, advancing 74.64 points to 5219.63.

ANZ senior economist Felicity Emmett said markets were firmly focused on the Federal Reserve and whether it would begin reeling in its $US85 billion a month stimulus.

Furthermore, Ms Emmett said, despite there being a sharp rally in Australian consumer and business confidence after the federal election, the labour market remained "glum".

"The question remains, however, as to whether this boost to confidence will translate into higher business or consumer spending," she said, adding ANZ job advertisements continued to decline while the jobless rate rose 5.8 per cent in August, from 5.7 per cent in July.

The weak jobs data took heat out of the Australian dollar, which had hit a three-month high at US93.52¢ before tumbling to US92.42¢ at Friday's close.

"The soft employment report on Thursday took some of the steam out of the AUD," RBS senior currency strategist Greg Gibbs said.

"But Australian yields and the AUD have been supported by strong consumer and business confidence this week and improvement in Chinese economic data suggesting its recovery since mid-year has gained further momentum."

Nevertheless, Mr Gibbs expected that momentum to pause, citing the expected tapering of the US Fed's stimulus and the general decline in global foreign exchange reserves.

"This has removed a key support for the AUD. China is frequently the biggest accumulator of FX reserves. However, it appears to be avoiding doing so at the moment," he said.

Despite talk of the Fed winding back its stimulus intensifying, 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 said.

"As long as things are improving then what's wrong with it? It's almost positive."

Miners led the market down following falls in the gold price, which headed for its worst week in two months, as tensions surrounding a possible US-led military strike on Syria eased.