Oct 5 (Reuters) - Australian shares backtracked on Wednesday, pulled lower by weakened commodity prices which dragged down the mining sector, and by heightened prospects of a U.S. Fed rate hike in December.
The S&P/ASX 200 index ticked lower by 38.4 points, or 0.7 percent, 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 percent to touch a four-month low.
Gold slid more than 3 percent and was on track for its biggest one-day drop in nearly 15 months on Tuesday as the dollar rallied after upbeat U.S. data.
Iron ore miners Rio Tinto and Fortescue Metals fell about 2 percent, while BHP Billiton Ltd slipped nearly a percent.
Prospects of a U.S. Federal Reserve rate hike in December lifted after Richmond Federal Reserve President Jeffrey Lacker said he would have voted in favor 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", McCarthy added.
Sentiment was also affected by a Bloomberg report that the European Central Bank would probably wind down its 80-billion-euro ($90-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 percent while Origin Energy declined 2 percent.
At the other end, Whitehaven Coal rose as much as 4.4 percent after physical coal prices surged to the highest level since the start of 2014.
Retail giant Woolworths Ltd edged up 0.2 percent. Australia's retail turnover for August rose 0.4 percent, according to Australian Bureau of Statistics. Forecasts centred on a rise of 0.2 percent 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 percent, 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 percent and 1.7 percent respectively. (Reporting by Justin George Varghese; Additional Reporting by Shashwat Pradhan in Bengaluru; Editing by Eric Meijer)