The S&P/ASX200 fell 16.3 points on Monday, down 0.18 per cent, to 9,076, as the broader All Ordinaries slipped 22.9 points, or 0.25 per cent, to 9,271.4.
The exchange handed back an early lead as traders digested a more hawkish US interest rate outlook, and as oil prices climbed on the back of renewed US-Iran fighting.
Brent crude topped $US90 a barrel, lifting refinery operators Ampol and Viva more than 2.3 per cent each.
In a flurry of apparent month-end portfolio rebalancing, the beaten-down financials segment rallied on Monday but ended the month almost six per cent lower, while raw materials stocks sold off but were up 11.6 per cent over the same period.
Investors regularly rebalance their portfolios by selling winning trades and buying underperformers to take profits while positioning for potential upswings.
"What you're seeing is just some profit-taking on those recent trades," IG market analyst Tony Sycamore told AAP.
Looking ahead, further Reserve Bank interest rate hikes would put pressure on bank and household-facing stock earnings, he said.
At a macroeconomic level, local inflation figures due Wednesday would be closely watched amid fears Australia's economy is facing stagflation - a toxic combination of low growth and high price growth.
"The fact that trimmed mean inflation is at 3.6 per cent and growth is at zero per cent, it's got all the hallmarks of stagflation, which is a very, very unpalatable backdrop for the ASX 200," IG's Mr Sycamore said.Â
Gold has retreated more than five per cent from a recent rally to $US4,440 ($A6,197), after US Federal Reserve chair Kevin Warsh assured the public he was serious about taming US inflation.
Bitcoin also tumbled after the speech but, much like the US government's $US40 trillion ($55.8 trillion) debt pile, the so-called US dollar "debasement trade" wasn't going anywhere, etoro lead analyst Josh Gilbert said.
"September if where this trade gets its real test," he said.
"If the Fed hikes and gold and bitcoin keep climbing anyway, with 30-year yields still near their highest since 2007, the market is telling us it's more worried about the size of the debt than the pace of inflation."
The Australian dollar is buying 71.61 US cents, down from 71.99 US cents on Friday at 5pm.
ON THE ASX:
* The S&P/ASX200 fell 16.3 points, or 0.18 per cent, to 9,076
* The broader All Ordinaries lost 22.9 points, or 0.25 per cent, to 9,271
One Australian dollar trades for:
* 71.61 US cents, from 71.99 US cents at 5pm AEST on Friday
* 114.42 Japanese yen, from 114.77 Japanese yen
* 61.79 euro cents, from 61.80 euro cents
* 52.87 British pence, from 52.96 pence
* 121.06 NZ cents, from 120.77 NZ cents
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