Australia's sharemarket slipped back from its five-year highs as investors cautiously awaited the US Federal Reserve's decision on the fate of its massive stimulus program.
The benchmark S&P/ASX 200 Index finished 13.14 points, or 0.3 per cent, lower at 5238.10, while the All Ordinaries dipped 14.9 points, or 0.3 per cent, to 5230.4.
The Fed is widely expected to start reducing its $US85-billion-a-month stimulus to $US75 billion. Much of the trimming is likely to come from purchase of government bonds, rather than mortgage-backed securities, therefore continuing to support the US housing-led recovery.
Macquarie Private Wealth director Martin Lakos said local trade was subdued, with a "a little bit of risk-off mentality coming back into the market".
Emerging market stocks and the Australian dollar, traditionally considered risky assets, have benefited from the Fed pumping trillions of dollars into the US economy to help counter the devastating effects of the financial crisis.
But Mr Lakos said tapering talk was one of three headwinds facing local shares, with all the road bumps coming from the US. The world's biggest economy is quickly approaching its debt limit, with Congress' deadline on raising the limit in the middle of next month.
Mr Lakos said that and speculation on the replacement for Fed chairman Ben Bernanke when his term expires at the end of January next year was sending ripples across markets.
Gold stocks have particularly been thrown about. The precious metal extended losses into a third session on Wednesday, falling more than 1 per cent to less than $US1300 an ounce.
"With the prospect of tapering coming in, we would expect US bond yields to start to go up, albeit modestly. That would add some support for the US dollar and being traded in US dollars, that can't be positive for gold," Mr Lakos said.
The energy sector was the worst performer on the ASX, losing 0.8 per cent, as crude prices fell to a six-week low. Woodside Petroleum eased 0.8 per cent to $38.43, while Origin Energy eased 0.4 per cent to $13.86.
The banks were mixed. CBA and Westpac rose 0.5 per cent to $73.98 and 0.2 per cent to $35.52 respectively, while NAB fell 0.1 per cent to $34.64 and ANZ shed 0.2 per cent to $30.73.