Australian shares pulled back on Wednesday, closing the last full session of 2020 in the red, as the country's most populous city tightened COVID-19 curbs ahead of New Year's Eve and investors took cues from a weak session on Wall Street.

The S&P/ASX 200 index ended down 0.27% at 6,682.4, snapping a three-day gain. The benchmark recovered from a session low of 6630.5.

Authorities restricted movement and tightened curbs on gatherings in Sydney, hoping to avoid "super spreader" events during New Year's Eve celebrations, after detecting a fresh cluster in the city this month.

In the United States, stocks retreated from record highs on Tuesday, as uncertainty loomed over whether the Senate would authorize additional pandemic aid checks.

Trading volumes in the Australian markets were about a quarter of their thirty-day average as investors stayed on the sidelines ahead of Thursday's half-day session and the long New Year weekend.

Most traders were on holiday and not at their desks. It didn't take much to drive the market up or down - so the initial sell-off was bigger than normal, Brad Smoling, managing director at Smoling Stockbroking said.

Smoling anticipates more volatility heading into 2021, as government stimulus runs its course.

"The first quarter is going to be very turbulent. We're seeing the tell-tale signs with bitcoin and gold and silver starting to move up, " he said.

The top losers were tech stocks, down 1.6%. Buy-now-pay-later firms weighed, with After pay and Sezzle closing down 3.4% and 4.2%, respectively.

An uptick in oil prices drove the local energy sub-index up 0.4%, with heavyweight Santos giving up 0.2%.

Gold stocks ended slightly lower despite a rise in spot prices, while financials tracked the broad market sell-off to close down 0.3%.

New Zealand's benchmark S&P/NZX 50 index closed down 0.2% at 13,217.14.