The New Year's hangover for the local bourse is lingering, with shares falling for a second day amid more conflict in the Middle East and questions about the aggressive US rate cuts many commentators expect this year.
The benchmark S&P/ASX200 index on Thursday finished down 29.1 points, or 0.39 per cent, to 7,494.1, after dropping 1.37 per cent on Wednesday.
The broader All Ordinaries on Thursday fell 26.7 points, or 0.34 per cent, to 7,730.6.
Overnight on Wall Street, the S&P500 fell 0.8 per cent as traders digested the release of minutes from the rate-setting Federal Open Market Committee's meeting last month noting members had a "unusually elevated degree of uncertainty" about the path forward.
While members expect three rate cuts in 2024, some noted the potential for additional hikes depending on how conditions evolve - an outcome markets are certainly not expecting.
The ASX's energy sector was its best performing category on Thursday, rising 1.3 per cent, which Eightcap market analyst Zoran Kresovic attributed to rising tensions in the Middle East.
In Iran, officials were vowing revenge after a bombing at a memorial for the country's former top general killed more than 100 people, while in Lebanon, Hezbollah was pledging to avenge the assassination of a Hamas leader in a drone strike.
"All the challenges that are going on there at the moment could create more issues going into 2024 and could cause quite a bit of disruptions in terms of energy prices boiling over and supply and demand issues," Mr Kresovic told AAP.
Whitehaven Coal rose 1.6 per cent to an 11-month high of $7.81, while Yancoal added 3.3 per cent and New Hope advanced 1.0 per cent.
The big retail banks were all lower, with ANZ down 0.8 per cent to $25.54, Westpac falling 1.0 per cent to $22.64, NAB dipping 0.4 per cent to $30.46 and CBA slipping 0.6 per cent to $111.49.
In the heavyweight mining sector, the iron ore giants were mixed while goldminers and lithium miners were down.
Fortescue rose 0.3 per cent to $28.93, BHP dipped 0.4 per cent to $49.58 and Rio Tinto fell 0.2 per cent to $134.50. Northern Star fell 2.8 per cent to $1.28 and Pilbara retreated 1.8 per cent to $3.86.
Arcadium Lithium - the new company formed by mergers between lithium producers Allkem and Livent Corp - fell 9.2 per cent to $9.87 on the final day of its shares trading on a deferred settlement basis.
The Australian dollar was buying 67.42 US cents, from 67.65 US cents at Wednesday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index on Thursday finished down 29.1 points, or 0.39 per cent, at 7,494.1.
* The broader All Ordinaries dropped 26.7 points, or 0.34 per cent, to 7,730.6.
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 67.42 US cents, from 67.65 US cents at Wednesday's ASX close
* 96.90 Japanese yen, from 96.09 Japanese yen
* 61.70 Euro cents, from 61.76 Euro cents
* 53.22 British pence, from 53.55 pence
* 107.68 NZ cents, from 107.88 NZ cents
