US stocks ended lower, with political uncertainty keeping investors cautious as worries grow over the need to raise the debt ceiling.
Credit rating agency Moody's warned it could downgrade the country's top investment ranking of AAA if the US defaulted on its debts, as the government faces running out of cash possibly as early as October.
But Moody's said it would not slash the AAA rating because of delays on non-debt payments including the wages of government workers or social security payments.
Oil prices fell as Tropical Storm Harvey strengthened into a hurricane over the Gulf of Mexico and oil refiners shut down operations.
ANZ head of Australian economics David Plank said crude oil production was not expected to be affected too much by Hurricane Harvey.
"However, the area is a refining hub and traders are becoming concerned that demand will be dented if damage to refineries keeps them offline for an extended period of time," Mr Plank noted.
Central bankers take centre stage
Investors are also waiting for clues on monetary policy from the meeting of central bankers in Jackson Hole, Wyoming.
US Federal Reserve chief Janet Yellen and European Central Bank boss Mario Draghi will speak at the meeting.
Dr Yellen will give a speech tonight about financial stability.
Spot gold eased back as investors await the events at Jackson Hole.
Retailers gained ground on Wall Street after better quarterly profit results than forecast from Signet Jewellers, clothing firm Guess and budget retailer Dollar Tree.
Signet Jewelers rose nearly 17 per cent on strong sales of bracelets, rings and necklaces. Guess jumped 19 per cent.
Food companies also fell after a disappointing quarterly result from JM Smucker, which reported weaker than expected sales for its Folgers coffee business.
Other firms reported earnings that were lower than expected.
Amazon said it would cut prices on a range of products from Monday after it bought Whole Foods Market for $US13.7 billion.
Stocks in rival grocers Kroger, Wal-Mart, Target, Costco, Supervalu and Sprouts Farmers Markets fell in a $12 billion wipe-out amid a new challenge for bricks and mortar retailers from the world's biggest online retailer.
US house sales slide
In economic news, a report from the National Association of Realtors showed that sales of established homes in the US fell 1.3 per cent last month despite expectations of growth, the slowest pace since August last year.
However, prices increased 6.2 per cent and inventories dropped, which Mr Plank said suggested the declines could be short-lived.
But fewer workers made claims for unemployment benefits last week, which is a good sign for the jobs market.
In Europe, major markets made small gains, with the FTSE 100 in London putting on 0.3 per cent.
In futures trade, the ASX SPI 200 Index was slightly weaker, indicating a flat start to trade today on the market.
