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Australia: Shares towed down by commodities, US rate hike risk

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[BENGALURU] Australian shares backtracked on Wednesday, pulled lower by weakened commodity prices which dragged down the mining sector, and by heightened prospects of a US Fed rate hike in December.

The S&P/ASX 200 index ticked lower by 38.4 points, or 0.7 per cent, to 5,445.6 by 0030 GMT.

Materials were the biggest drag on the benchmark index with gold producer Newcrest Mining Ltd shedding as much as 7.6 per cent to touch a four-month low.

Gold slid more than 3 per cent and was on track for its biggest one-day drop in nearly 15 months on Tuesday as the US dollar rallied after upbeat US data.

Iron ore miners Rio Tinto and Fortescue Metals fell about 2 per cent, while BHP Billiton Ltd slipped nearly a per cent.

Prospects of a US Federal Reserve rate hike in December lifted after Richmond Federal Reserve President Jeffrey Lacker said he would have voted in favour of an interest rate hike at the Fed's September policy meeting.

"The Fed is actually being much clearer about what it sees is the need to lift interest rates in December, than market pricing," said Michael McCarthy, chief market strategist with CMC Markets.

"So, I suspect that if that helps move the market more towards the idea that there is a rate rise coming in December, that will more closely reflect actual Fed rhetoric", Mr McCarthy added.

Sentiment was also affected by a Bloomberg report that the European Central Bank would probably wind down its 80-billion-euro (S$123 billion) monthly bond purchases gradually before ending its quantitative easing programme, citing unnamed officials at euro zone countries' central banks.

In response, ECB media officer Michael Steen tweeted that the bank's decision-making body has not discussed reducing the pace of its monthly bond buying.

Energy stocks traded in the red after oil settled down on Tuesday. Beach Energy Ltd was down 3.2 per cent while Origin Energy declined 2 per cent.

At the other end, Whitehaven Coal rose as much as 4.4 per cent after physical coal prices surged to the highest level since the start of 2014.

Retail giant Woolworths Ltd edged up 0.2 per cent. Australia's retail turnover for August rose 0.4 per cent, according to Australian Bureau of Statistics. Forecasts centred on a rise of 0.2 per cent on the month, a Reuters poll showed.

New Zealand's benchmark S&P/NZX 50 index fell for a second consecutive session, sliding nearly 0.9 per cent, or 66.82 points, to 7,285.64.

Utilities and industrials were the biggest drag on the benchmark.

Electricity retailers Meridian Energy Ltd and Mercury NZ Ltd dropped 1.9 per cent and 1.7 per cent respectively.