The benchmark S&P/ASX 200 Index dropped 11.8 points, or 0.2 per cent to 5506.1. The broader All Ordinaries Index dipped 13.6 points, or 0.2 per cent, to 5479.2.

Oil prices rose slightly, bucking their recent downward trend but iron ore continued to slide, dropping 2 per cent to $US76.46 a tonne, while gold fell below $US1150 an ounce, its lowest since April 2010.

Australian employment figures were slightly better than expected as 24,100 new jobs were created in October, while the unemployment rate stayed static at 6.2 per cent.

Credit Suisse equity strategist Damien Boey said the Australian market was currently experiencing a number of conflicting forces that don't necessarily lead to logical outcomes.

"Things have been a little bit weird today. You've had a labour market report which on balance, it doesn't matter how you cut it, there were more positives in it for the market than negatives, yet the market went down," Mr Boey said

Mr Boey said the general weakness in the commodity complex was potentially one of the reasons why positive news led to a negative result across the sharemarket.

"We've seen the Aussie dollar fall, we've seen iron ore prices fall, we're seeing energy prices fall, so there seems to be some sort of risk-off trade specific to Asia / the commodity complex," Mr Boey said.

Among iron ore miners, Fortescue Metals Group and Atlas Iron were hammered dropping 8.5 per cent and 16.6 per cent respectively, with Fortescue's share price at a 16-month low of $3.03.

Telcos, utilities and energy stocks all performed well despite the overall drop, as the oil price rallied slightly and bucked the recent downward trend.

Telstra also saw some small gains with the telco rising 0.7 per cent to $5.67.

The financials and materials sectors were the worst performers.

Commonwealth Bank dropped 0.5 per cent to $81.19 and Westpac Banking Corp dropped 0.5 per cent to $34.41. Australia and New Zealand Banking Group dropped 0.6 per cent to $33.60, while National Australia Bank ended down 0.7 per cent lower at $34.18.

ANZ, NAB trade ex-dividend on Friday and Westpac on Monday, which may have contributed to the selling.

Among the major miners, Rio Tinto dipped 0.3 per cent to $60.00, while BHP Billiton dipped 0.1 per cent to $33.78.

On the back of takeover rumours embattled retailer Super Retail Group (who own Rebel Sport and Amart) and broadcaster Ten Network Holdings enjoyed rises of 12 and 7 per cent respectively.

As reported by the Australian Financial Review, Super Retail Group is rumoured to be a target for UK retailer Sports Direct and Ten Network Holdings is reported to once again be a potential target for Foxtel.

Rupert Murdoch's News Corporation also enjoyed a 6.6 per cent rise on the back of a strong 28 per cent increase in 3rd quarter earnings.

"Their Australian newspaper business is improving and circulation numbers are growing via a combination of print and digital subscriptions and their online real estate business interests are performing strongly," said Morgans stockbroker Tim Evans in his daily report.

Food and liquor retailers rose, with Woolworths up 0.6 per cent to $34.35, and Wesfarmers, owner of Coles, rising 0.3 per cent to $44.04.