Australian retail sales suffered their first fall of 2022 in October as rising prices and higher interest rates finally seemed to have an impact on spending, a surprisingly soft result that suggests tighter policy is working as intended.

Data from the Australian Bureau of Statistics (ABS) on Monday showed retail sales declined 0.2 per cent in October from September to $35 billion.

That was well under forecasts of a 0.5 per cent increase, although it still left sales up 12.5 per cent on October last year when pandemic restrictions were making shopping difficult.

"The October fall in retail turnover ends a run of nine straight monthly rises and suggests increased cost of living pressures including interest rate rises have started to weigh on consumer spending," said Ben Dorber, head of retail statistics at the ABS.

Inflation is running at a 32-year high of 7.3 per cent and is set to reach 8 per cent or higher this quarter, with food, energy and construction costs all rising.

To restrain this surge, the Reserve Bank of Australia (RBA) has lifted interest rates by 275 basis points since May to a nine-year top of 2.85 per cent.

Markets are still wagering on another quarter-point hike to 3.10 per cent at its December policy meeting next week, but trimmed the implied peak for rates slightly to around 3.78 per cent from 3.85 per cent ahead of the retail data.

"Despite inflation still running at a brisk pace, retail turnover has now fallen – a sign that higher interest rates and the ongoing squeeze on real incomes is dampening consumer demand," Sean Langcake, head of macroeconomic forecasting for BIS Oxford Economics, said in a note.

RBA Governor Philip Lowe has cited consumption as a major uncertainty given the full effect of past rate rises is yet to show in mortgage payments, which could climb by around $950 a month on a typical loan.

This was one reason the central bank hiked by only 25 basis points in November, rather than half a point.

ASX lower

Australian shares slipped on Monday as commodity stocks led losses, with investors remaining cautious of China's aggressive reaction to a resurgence of COVID-19 cases.

The Chinese government on Sunday imposed stricter COVID-19 restrictions over increasing cases, causing civil unrest in Shanghai and leaving investors worried about demand.

"Chinese near-term outlook continues to be a concern with COVID-19 cases reaching record numbers," analysts at National Australia Bank said in a note.

The ASX 200 closed down 30 points or 0.4 per cent to 7,229, with energy and mining stocks leading the losses.

By 4:16pm AEDT, the Australian dollar was down 0.9 per cent, at 66.88 US cents.

Bank of Queensland lost 5.6 per cent after announcing its CEO George Frazis was quitting the bank.

Shares of Healius plunged 10.1 per cent after the healthcare company flagged its revenue has fallen sharply as much fewer are getting tested for COVID.

Bucking the trend, News Corp was up 2.2 per cent, coal miner New Hope Corporation firmed 5.4 per cent and Whitehaven Coal gained around 4 per cent.

Nasdaq falls on investor caution

The Nasdaq closed Friday's shorter session lower with pressure from Apple, while the dollar gained as investors shied away from risk as they worried about consumer spending and monitored China's reaction to a resurgence of COVID cases.

Frustration simmered among residents and business groups in China as the government set stricter COVID-19 control curbs just weeks after hopes for easing restrictions had been raised.

And market heavyweight Apple's shares were weighed down by concerns about its manufacturer Foxconn.

Foxconn's flagship iPhone plant in China was expected to show a November shipment slowdown as thousands of employees left in the latest bout of unrest, Reuters reported, citing an unnamed source with direct knowledge of the matter.

"The biggest news item is what's going on in China, the protests against the zero COVID tolerance policies," Brian Jacobsen, senior investment strategist at AllSpring, said.

"Investors are in a holding pattern waiting for some catalyst even though we're not quite sure what that catalyst will be," Mr Jacobsen said, noting that an easing of China's restrictions would promote a risk-on mood while tightening or keeping restrictions would have the opposite effect.

In the US, trading was also likely impacted by lower volume as many traders take a vacation for the market half-day due to Thursday's Thanksgiving holiday.

The mood was cautious as the all-important gift-buying season kicked off. With inflation soaring, investors are watching out for signs of weakness in consumer spending.

And while shoppers often turn out in record numbers for Black Friday discounts, so far on Friday, Reuters reported that crowds were thin outside stores on what is historically the busiest shopping day.

The Dow Jones Industrial Average rose 152.97 points, or 0.45 per cent, to 34,347.03, the S&P 500 lost 1.14 points, or 0.03 per cent, to 4,026.12 and the Nasdaq Composite dropped 58.96 points, or 0.52 per cent, to 11,226.36.

MSCI's gauge of stocks across the globe shed 0.15 per cent on Friday but added about 1.5 per cent for the week.

Europe's retailers, while fearing the shopping season could be the worst in at least a decade, were also offering Black Friday deals in hopes of boosting spending against the backdrop of high inflation and the distraction of the soccer World Cup.

Europe's STOXX 600 ended down 0.02 per cent on Friday but boasted a 1.7 per cent weekly percentage gain, marking six weekly advances in a row for the first time since late 2021.

US dollar gains, oil falls

The US dollar crept higher across the board in what looked like a quiet session but it remained near multi-month lows as the prospect of the Federal Reserve moderating the pace of its policy tightening weighed on the US currency.

"[Friday] has all the indicators of another session dominated by USD consolidation in lieu of any major cross-asset drivers," said Simon Harvey, senior FX analyst at Monex Europe adding that "liquidity is quite limited".

The dollar index rose 0.21 per cent, while the euro was down 0.07 per cent to $US1.0401.

US Treasury yields gave up earlier gains after already falling on Wednesday after the Fed's November meeting minutes indicated agreement that rate hiking could be slowed.

Benchmark 10-year notes were down 1.5 basis points to 3.694 per cent, from 3.709 per cent late on Wednesday.

Oil prices fell on Friday in thin market liquidity, closing a week marked by worries about Chinese demand and haggling over a Western price cap on Russian oil.

Brent settled at $US83.63, down $US1.71, or 2 per cent on the day.

Gold prices retreated after the precious metal posted gains in the previous three sessions on expectations the US Federal Reserve would scale back its rate-hiking stance.

Spot gold dropped 0.1 per cent to $US1,753.61 an ounce.

ABC/Reuters