Despite keeping afloat for most of the session, the benchmark S&P/ASX 200 Index and the broader All Ordinaries Index each edged down 0.04 per cent, on Wednesday to 5656.1 points and 5654.6 points respectively, with mining and energy stocks the hardest hit.

Local shares took a weak lead from Wall St where the S&P 500 and Dow Jones Industrial Average both posted modest falls on Tuesday night. The positive impact of strong US manufacturing data was offset by a slump in energy prices. European markets were mixed with all eyes on the European Central Bank meeting on Thursday (European time).

"If the ECB does decide to start effectively printing money then that cash will not only find its way into European stocks, but sustain the rally in equity markets globally - including Australia," HOSTPLUS chief investment officer Sam Sicilia said.

In domestic economic news, Australian Bureau of Statistics data showed GDP grew a modest 0.5 per cent in the June quarter. The result was slightly firmer than expected.

"Recent communication has seen the Reserve Bank of Australia highlight the potential divergence in key growth drivers, and the Q2 GDP report exemplified that warning," BNP Paribas market economist Mark Walton said.

RBA governor Glenn Stevens gave a speech on Wednesday ramping up his recent warnings about a potential bubble forming in the property market. The governor also said he was aware of the need to avoid "too much build-up" of risk in the banking sector leaving people "over-extended" and the economy exposed to "nasty shocks" in the future.

Despite Mr Stevens' caution the big four banks were stronger. Commonwealth Bank of Australia added 0.3 per cent to $81.70, while Westpac Banking Corporation rose 0.1 per cent to $35.22. ANZ Banking Group gained 0.2 per cent to $33.67, and National Australia Bank lifted 0.6 per cent to $35.31.

Insurance and wealth management company AMP Ltd dropped 22¢ to $5.64 after trading without the rights to a 12.5¢ per share interim dividend.Other major stocks that traded ex-dividend included engineering firm WorleyParsons, stock exchange operator ASX Ltd, television broadcaster Nine Entertainment Co, and electronics retailer Dick Smith Holdings.

Telecommunications was the best-performing sector as Telstra Corporation continued its week-long rally up another 1.1 per cent to $5.72. In food and liquor, Woolworths edged up 0.1 per cent to $35.97, while Wesfarmers, owner of Coles, rose 0.2 per cent to $43.80.

In China, the HSBC services PMI for August bounced off a nine year low in July to 54.1 points, its strongest reading since March 2103. China's official services sector purchasing managers index for August read 54.4 points, up from July's six-month low of 54.2 points.

BHP Billiton weighed heavily on the bourse, shedding 70¢ to $36.20 after trading without the rights to a US62¢ (67¢) per share dividend.

Rio Tinto shed 1.1 per cent to $62.34, and iron ore miner Fortescue Metals Group lost 2.4 per cent to $4.BC Iron was the worst-performing stock in the ASX 200, down 6.1 per cent to $2.30.

The spot price for iron ore, delivered in China matched its five-year low of $US86.70 a tonne. When the ASX closed, Dalian iron ore futures trading in China was tipping another fall in the spot price overnight.

Australia's biggest oil producer Woodside Petroleum fell 0.8 per cent to $43.31 with Brent crude oil trading around $US100.76 a barrel.

Lynas Corporation was the best-performing stock in the ASX 200, up 9.7 per cent to 17¢. On Tuesday the miner announced its rare earths processing plant had been granted a long-awaited full operating stage license by the Malaysian Atomic Energy Licensing Board.