Apart from a brief spike after the opening bell, the market traded in the red for the whole session. The benchmark S&P/ASX 200 index fell 0.3 per cent, or by 20 points, to 5679.3 while the All Ordinaries dropped 17 points to 5664.3.

The Dow Jones fell 0.3 per cent on Friday but it was falling commodity prices that unsettled investors, with the iron ore price dropping 4 per cent and Brent crude oil down 2 per cent.

"We had a weak lead from offshore and resources are under pressure today," said Wilson Asset Management senior equity analyst Martin Hickson. "The market's weaker due to a poor performance in the energy and materials sector, both of which are down over 1 per cent. They're the main reasons the market is off today. The banks are holding up OK."

Investors largely shrugged off disappointing data out of China that suggested factory activity in the world's second-largest economy continued to slow, while Chinese sharemarkets, which have been volatile in recent weeks, extended their losses.

Mr Hickson said the bank holiday in New South Wales had definitely softened volume but traders were not concerned about Tuesday's Reserve Bank meeting. "The consensus would be for rates on hold. I don't think people would be holding off for the announcement."

Capital Economics Australian and New Zealand economist Paul Dales said "we are not expecting the Reserve Bank to cut interest rates below the current level of 2 per cent ... but we wouldn't completely rule out a cut, especially if the bank revised down its GDP growth forecast for 2016."

Mark Lennox, senior private adviser at HC Securities, said the market could be expected to trade lower throughout the week.

"The market is broadly expected to trade towards 5750 on the ASX 200 this week as the commodities continue to drag on the markets," he said.

"Copper and gold are trading at 12-month lows and they are putting a dent on the market ... we are seeing active traders taking short positions across oil, copper and gold producers."

Reporting season commences this week and analysts are expecting a fairly flat earnings season with few surprises, a moderate lift for equities and reliable dividends.

"We're not expecting a big earnings season," said Credit Suisse equity analyst Damien Boey.

"We expect to see more companies trying to take advantage of the low cost of debt and returning cash to shareholders."

The big banks were mostly down, with Commonwealth Bank losing 0.2 per cent to $87.37, National Australia Bank down 0.5 per cent to $34.59, Westpac only marginally lower at $34.85 and ANZ flat at $32.68.

The big miners bore the brunt of falling commodity prices, with BHP down 1 per cent to $26.18 and Rio Tinto off 1.2 per cent to $52.20. Despite the falling iron ore price, Fortescue Metals Group rose 0.3 per cent to $1.86.

Fellow blue-chip stock Telstra slipped 0.8 per cent to $6.44.

The falling oil price hit Santos, down 0.8 per cent to $7.34, and Woodside, which lost 1.1 per cent to $35.25.

In other sharemarket news, takeover target Skilled Group announced it will book an impairment charge of up to $67 million, which has been triggered by the merger proposal by rival Programmed Maintenance to form an enlarged $700 million-plus labour hire firm.

Investors reacted by pushing Skilled shares 2.9 per cent higher on the news to $1.58, while Programmed jumped 4.6 per cent to $2.50.

Childcare operator G8 Education sweetened its takeover bid for smaller rival Affinity Education, increasing its price to 80¢ a share and allowing investors to take up the offer in cash or shares.

The $1.2 billion company put out a supplementary bidder statement this morning that revealed an improved scrip offer and the new cash bid.

G8 rose 2.9 per cent to $3.50 while Affinity surged 11.5 per cent to 82.5¢.