Australian shares edged lower to a weaker finish as investors remained cautious ahead of the release of key US employment data. At the close on Friday, the benchmark S&P/ASX200 index was down 16.6 points, or 0.39 per cent, at 4,251.2, while the broader All Ordinaries index was down 13.1 points, or 0.3 per cent, at 4,320.1. The March share price index futures contract was down 22 points at 4,217, with 19,799 contracts traded. On the bourse, there were 1.89 billion shares traded for a value of $4.22 billion. There were 533 shares up, 470 down and 374 unchanged. Economists expect the closely watched US payroll figures, due later on Friday, to show an extra 150,000 jobs added in January after rising 200,000 in December but with the unemployment rate steady at 8.5 per cent. City Index chief market analyst Peter Esho said he expected Australian equity trading to remain quiet. Dragging the market down on Friday was a fall in the consumer staples sector as investors considered long-term prospects for  supermarkets after Wesfarmers and Woolworths sales figures released earlier this week. Wesfarmers sank 43 cents to $29.47 and Woolworths fell 20 cents to $24.40.

Major miners eased as investors mulled over the implications of news that Glencore International and Xstrata were planning a tie-up of their mining assets. BHP Billiton shed two cents to $37.60 and Rio Tinto was off 22 cents at $70.50. Banks lost ground, with Europe's debt crisis continuing to pressure lending costs. Westpac chief executive Gail Kelly on Friday refused to speculate about whether the bank would pass on any cuts next week if the central bank cut its cash rate. Westpac lost 13 cents to $20.79, ANZ Bank shed 25 cents to $21.11, National Australia Bank fell 14 cents to $23.75 and Commonwealth Bank of Australia lost nine cents to $50.57. Shares in Magma Metals skyrocketed after nickel miner Panoramic Resources launched a $40 million takeover bid for the base metals explorer. Magma was the biggest gainer of the day, rising 5.5 cents, or 68.8 per cent, to 13.5 cents. Panoramic was down one cent at $1.26. Decmil Group added four cents to $2.48 after the engineering and construction firm won a $90 million contract for work at BHP Billiton Mitsubishi Alliances' Caval Ridge coal mine in Queensland.

The Australian dollar retreated Friday as investors moved to the sidelines ahead of U.S. payrolls data, which will set the tone for markets throughout next week and possibly beyond. Currency traders were also pointing to next Tuesday's meeting of the Reserve Bank of Australia interest-rate setting board amid expectations it will deliver the third cut in interest rates since November. The Australian dollar was trading at $1.0690, down from $1.0713 late Thursday. Against the Japanese yen, the Australian currency changed hands at 81.44, down from 81.60. It touched a week's high of $1.0756.