(Reuters) - Energy stocks pulled Australian shares lower on Wednesday, with investors cautious ahead of the U.S. Federal Reserve's rate decision and key domestic employment data.
The S&P/ASX 200 index <.AXJO> shed 0.2% or 13.7 points to end at 6,681.60. The benchmark had firmed 0.3% on Tuesday.
Australia's key monthly employment report, due on Thursday, could influence the central bank's monetary policy decision in the coming months.
"Higher unemployment rate or much slower jobs growth — that could be the sort of thing that makes economists talk about the possibility for a rate cut in October," said Steven Daghlian, market analyst at CommSec.
Slowing consumer spending has been one of the biggest worries for the Australian central bank recently, which it hopes to address through additional easing if needed, while aiming at a inflation target of 2% to 3%.
Meanwhile, the U.S. Federal Reserve concludes its two-day policy meeting on Wednesday, and economists widely expect a quarter percentage point rate cut — the central bank's second easing this year.
Investors will look for clues on how far U.S. monetary policy easing will go, given that Fed policymakers are deeply divided on whether more rate cuts are warranted.
"The sentiment is cautious as there is a bit at stake in the next couple of days for markets", Daghlian said of the upcoming economic events.
The Australian energy index <.AXEJ> declined 1.8% at close, as its oil-related constituents were hit by a fall in oil prices, after Saudi Arabia assured that the Kingdom would restore lost oil production by the end of the month.
Oil and gas heavyweight Woodside Petroleum <WPL.AX> was among top drags on the benchmark index, ending nearly 3% lower and at a one-week low, while peer Oil Search <OSH.AX> slipped about 2%.
The world's largest miner BHP Group <BHP.AX>, which also has an exposure to oil, closed about 0.3% lower and weighed on the main benchmark.
The financial subindex <.AXFJ>, the heaviest constituent on the Australian benchmark, ended 0.5% lower, pressured by the downward trending "Big Four" banks.
Gold stocks <.AXGD> climbed almost 2% as bullion prices jumped after investors rushed to safe haven instruments on nervousness around geopolitical risks in the Middle East.
Meanwhile, New Zealand's benchmark S&P/NZX 50 index <.NZ50> fell 0.9% or 93.18 points to close at 10,774.85.
Dairy company A2 Milk <ATM.NZ> declined almost 4% to its lowest since late-March, while peer Synlait Milk <SML.NZ> finished about 2% lower.
(Reporting by Nikhil Subba in Bengaluru; editing by Uttaresh.V)
