The S&P/ASX200 had slumped 1.2 per cent in the first few minutes of trading on Monday, following the release of key US jobs data late Friday.
The benchmark index however ground higher for most of the day to finish down just 25.3 points, or 0.32 per cent, to 7,988.1, while the broader All Ordinaries fell 22.9 points, or 0.28 per cent, to 8,191.9.
"The markets held up reasonably well given the lead from Wall Street and the clear red signals in asset prices of a looming US recession," said Capital.com analyst Kyle Rodda.
A monthly US jobs report released on Friday night hadn't been that bad, Mr Rodda said, but markets were reacting as if it was a portent of recession.
The non-farm payrolls report showed America's economy added 140,000 jobs in August, below estimates of about 160,000 economists had expected. But unemployment ticked lower and wages ticked higher.
Pepperstone head of research Chris Weston said the jobs report lacked the clarity many crave.
He said a speech by Federal Reserve official Christopher Waller was also vague on whether the central bank would opt to cut interest rates by a half a percentage point next week, rather than its more traditional cut of a quarter of a percentage point.
With hindsight, that mix of weaker employment data and a non-committal Fed had proven to be a toxic mix for risk, Mr Weston said.
Six of the ASX's 11 sectors finished lower on Monday and four closed higher, with materials basically flat.
The consumer discretionary sector was the biggest mover, dropping 0.8 per cent.
Super Retail Group dropped 7.4 per cent to $16.89 as the Supercheap Auto owner traded ex-dividend, Premier Investments slumped 3.9 per cent to $33.85 after firing the managing director of its Smiggle back-to-school chain, and Adairs dipped 4.1 per cent to $1.865.
All of the big four banks finished lower, with ANZ dropping 0.9 per cent to $31.52, NAB dipping 0.3 per cent to $38.93, CBA declining 0.4 per cent to $142.95 and Westpac retreating 0.7 per cent to $31.87 after announcing a successor to current CEO and managing director Peter King.
Anthony Miller, the head of Westpac's business and wealth division, will take over when Mr King retires in mid-December after a 30-year career with Australia's oldest corporation.
Elsewhere in the sector, NIB Holdings dipped 6.3 per cent to a three-year low of $5.63 and Steadfast Group slid 6.1 per cent to $5.96 before its shares were placed in a trading halt.
The general insurance broker network said it wanted time to respond to a story published by ABC's Four Corners alleging Steadfast paid undisclosed kickbacks to strata management firms for purchasing its policies.
In the heavyweight mining sector, Rio Tinto dropped 0.2 per cent to $106.83, while Fortescue grew 0.5 per cent to to $16.20 and BHP added 0.8 per cent to $38.76.
The Australian dollar was at a three-week low against its US counterpart, buying 66.70 US cents, from 67.35 US cents at Friday's ASX close.
ON THE ASX:
* The benchmark S&P/ASX200 index finished Monday down 25.3 points, or 0.32 per cent, at 7,988.1
* The All Ordinaries dropped 22.9 points, or 0.28 per cent, at 8,191.9
CURRENCY SNAPSHOT:
One Australian dollar buys:
* 66.70 US cents, from 67.35 US cents at Friday's ASX close
* 95.40 Japanese yen, from 95.68 Japanese yen
* 60.28 euro cents, from 60.55 euro cents
* 50.90 British pence, from 51.05 pence
* 108.39 NZ cents, from 108.17 NZ cents
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