Markets have been fretting that the US economy could contract again if no deal is reached in Washington to avoid the "fiscal cliff" - large, automatic budget cuts and tax increases that begin to take effect in the new year.

But losses were limited on Friday after China announced that its economy is turning the corner and is likely to meet its growth target for the year. Industrial output, exports and retail sales all beat expectations in October.

Top lender Westpac Banking Corp led banking losses, dropping 1.3 percent. National Australia Bank Ltd bucked the trend, rising 0.5 percent.

Bellwether miners were mixed. BHP Billiton Ltd slipped 0.3 percent, while rival Rio Tinto Ltd was up 0.3 percent.

The benchmark S&P/ASX 200 index was 4.6 points lower at 4,344.7 by 0036 GMT. It fell 0.9 percent on Thursday.

Australian shares are down 5.1 pecent from 15-month highs reached in October.

"We were expecting the market to be a bit weaker today because just sentiment in general is pretty poor," said Cameron Peacock, market analyst at IG Markets.

"We've had a terrible last week and a half."

Some defensive stocks gained, with blood products maker CSL Ltd jumping 0.8 percent, supermarket retailer Wesfarmers Ltd up 0.7 percent and Australia's No. 1 telecommunications provider Telstra rising 0.4 percent.

New Zealand's benchmark NZX 50 index inched up 1.7 points to 3,953.2.