Australian shares closed almost half a per cent lower on the final trading day of 2012, as investors locked in profits following a negative lead from Wall Street.
The benchmark S&P/ASX200 index closed a shortened session down 22.4 points, or 0.48 per cent, at 4,648.9 points on Monday, while the broader All Ordinaries index fell 20.7 points, or 0.44 per cent, to 4,664.6 points.
On the ASX 24, the March 2013 share price index futures contract was 30 points lower at 4,616 points, on volume of 14,233 contracts traded.
The Australian stock market closed early on New Year's Eve and will resume trade on Wednesday, January 2, 2013.
The prospect of no deal being reached between US president Barack Obama and legislators in the US Congress over a looming budget deadline caused investors to offload stocks during Friday night's (AEDT) US session.
CommSec economist Craig James said local investors now appeared to be more optimistic about the US situation, and took heart from stronger-than-expected Chinese manufacturing figures released at 1230 AEDT.
"It was short-lived strength, but there was a degree of strength when the Chinese data came through," Mr James said.
"What we're seeing now is some of the late book squaring and profit-taking by a number of the professional investors and some retail-type investors."
Australia had again outperformed European and US markets, with most people optimistic that an agreement would be reached in the US.
Wall Street closed lower - the Dow slipped 1.21 per cent, the S&P500 eased 1.1 per cent and the NASDAQ tumbled 0.86 per cent.
In local news, Fairfax Media was up 7.4 per cent at 51 cents after it emerged advertising man John Singleton and investment banker Mark Carnegie had bought into the struggling publisher.
Sundance Resources shares were 15.6 per cent higher at 37 cents following reports that Hanlong Mining is finalising the $1.3 billion acquisition of the Australian miner.
Two of the best-performing stocks over the year, DrillSearch and Breville, suffered losses on Monday.
Breville was the worst-performing stock on the S&P/ASX200, tumbling five per cent, or 35 cents, to $6.65, while DrillSearch slipped 2.25 per cent, or 3.5 cents, to $1.52.
The spot price of gold in Sydney finished at $US1,663.34 per fine ounce, up $US1.19 from Friday's local close of $US1,662.15 per ounce.
National turnover was 609.5 million securities worth $1.2 billion, with 338 stocks trading up, 405 down and 354 unchanged.