[SYDNEY] Australian shares fell 0.7 per cent on Wednesday, led by losses in energy and banking stocks, while New Zealand and much of Asia put on modest gains on Wall Street's strength.
But sentiment in financial markets was fragile as oil prices, which bounced overnight, fell yet gain.
Chinese share markets extended on Tuesday's rout, falling more than 1 per cent and underscoring a nervous backdrop as investors brace for the US Federal Reserve's policy decision later in the global day.
The S&P/ASX 200 index dipped 33.5 points to 4,972.5 by 0257 GMT, having rallied 1.8 per cent on Monday. It was still well off a two-year trough of 4,803.9 touched last week.
The downturn in oil drove WorleyParsons down 8.3 percent. Oil Search fell nearly 5 percent after it reported a 10 percent drop in quarterly revenue due to lower oil and gas prices.
Origin Energy skidded 4.6 per cent, pulling closer to a 11-year trough touched last week.
Financial stocks also came under pressure, with Commonwealth Bank of Australia, ANZ Banking Group and National Australia Bank all down more than 1 per cent.
Mining stocks edged lower, with BHP Billiton down 0.3 percent, while Rio Tinto shed 1.2 per cent, not far from its weakest since 2009. Fortescue Metals skidded 3.2 per cent.
The discretionary sector, however, bucked the market with consumer electronics retailer JB Hi-Fi up 2.5 per cent, nudging closer to a record peak touched in 2009.
Across the Tasman sea, New Zealand's benchmark S&P/NZX 50 index was in positive territory, up 0.3 per cent or 19.77 points to 6,161.52.
A2 Milk posted the biggest gains, trading up 3.8 per cent and reversing its 1 per cent loss the previous session.
Accounting software company Xero rose 2.6 per cent and Meridian Energy increased 2.2 per cent.
Telecommunications company Spark rose 1.1 per cent after Morningstar raised its rating to hold from reduce.
Steel Tube led losses, falling 0.9 per cent, while Kiwi Property Group edged down 0.3 per cent after releasing sales growth figures.