THE sharemarket ended the week on a low note as investors took fright after US budget talks on the fiscal cliff fell into disarray.
The benchmark S&P/ASX 200 closed down 10.5 points,or 0.2 per cent,at 4623.6,reversing gains that had seen the index up by as much as 0.5 per cent at 4658.7.
"Sentiment has taken a change for the worse,"IG institutional trader Chris Weston said.
US House of Representatives Republican leaders cancelled a vote on their plan after it appeared they lacked support for a backup scheme proposed as a way of partially averting the fiscal cliff and told members to go home until after Christmas.
The sudden turn of events left negotiations between Democrats and Republicans in disarray with no clear path forward.
The change in sentiment quickly reversed gains among Australian shares,which had been boosted earlier by encouraging US economic data and hopes for a positive outcome to the fiscal cliff talks.
"With an apparent obstacle coming this close to the deadline,investor anxiety naturally heightened today and this was reflected in the performance of the ASX 200,"said Tim Waterer,a senior trader at CMC Markets.
CMC chief market strategist Michael McCarthy said a sell-off occurred at 12.16pm AEDT as Dow Futures fell 200 points.
"The market has put the most negative interpretation on that,"Mr McCarthy said."Frankly,that looks like a knee-jerk reaction to me because it only needs about 15 moderate Republicans to vote with the Democrats and a deal will be done."
Shares in Australian companies considered risk assets,such as those in the resources industry,erased earlier gains.
BHP Billiton and Rio Tinto were down 0.9 per cent,while Fortescue Metals retreated 2.7 per cent.
Some property companies,such as Dexus Property Group and Stockland,fell after going ex-dividend.
High-dividend companies,including banks,mostly managed to hold their gains.ANZ was up 0.6 per cent and Westpac and CBA were both 0.8 per cent higher.NAB closed up 0.2 per cent.
Qantas shares ended flat after the airline reported that its load factors--a measure of the portion of seats filled on its planes--increased last month as its international unit performed better.
Billabong shares sank to near all-time lows after chief financial officer Craig White left the troubled surfwear retailer late on Thursday.
That move came less than a day after the company began considering its lowest takeover offer in 10 months.
However,by the close Billabong shares had regained some ground,ending the day up 2.5c at 82.5c.
The spot price of Sydney gold closed at$US1644.32,down$US24.26 from Thursday's close of$US1668.58.
National turnover was 2.38 billion shares worth$8.4 billion,with 411 stocks up,546 down and 352 unchanged.
