(Adds analysis, quotes, stocks on the move)
SYDNEY, Nov 7 (Reuters) - Australian shares were down slightly on Thursday morning, with a handful of banking heavyweights losing ground after going ex-dividend while many investors took a breather after an earnings-driven rally.
Australia and New Zealand Banking Group dropped 3.8 percent while National Australia Bank fell 3.4 percent as both stocks traded without rights to their dividends.
"People are taking their dividends out of the 3 banks that have reported, so ANZ, NAB and Westpac, with a view that CBA outperforms leading up to their dividend which will be in February," said Jonathan Fyfe, investment adviser at Wilson HTM Investment Group, highlighting the flow of cash into Commonwealth Bank stocks.
Shares in Australia's top lender, Commonwealth Bank of Australia, added 0.9 percent.
The S&P/ASX 200 index fell 12.2 points to 5,241.6 by 0050 GMT, hovering at five-year highs. The benchmark ended flat on Wednesday.
A record-high night for Wall Street provided a base for the local market, while a soft Australian employment report left investors with much to ponder about the outlook for the economy and monetary policy.
Data released earlier showed Australian employment barely rose in October while the unemployment rate held at 5.7 percent, a disappointing report that knocked the local dollar and added to the case for a further cut in interest rates.
A strong earnings season, particularly led by banks, and a recovering economy have driven a rally in the Australian market, although uncertainty over the U.S. Federal Reserve's stimulus tapering plans has checked demand recently.
"We do expect the uptrend in global equities to continue into early next year," said Tim Radford, global analyst at Rivkin Securities in a note to clients, though he added that the U.S. budget and government debt issues early in 2014 may give investors cause for concern.
Consumer retail staples Woolworths Ltd and Wesfarmers Ltd added 0.7 percent and 0.5 percent ahead of Wesfarmer's annual general meeting set for later in the day.
Ausdrill Ltd slumped 28.4 percent to 4-month lows of A$0.98 after issuing a profit warning.
New Zealand's benchmark NZX 50 index rose 0.3 percent to 4,960.0 points.
New Zealand telecommunications network operator Chorus Ltd posted a second day of hefty losses sparked by the sector regulator recommending sharp price cuts for the company's wholesale broadband services. Chorus shares last traded down 7 percent at NZ$2.15, after touching a lifetime low of NZ$2.09.
On-line accounting software company Xero Ltd became New Zealand's second biggest listed stock by capitalisation as it rose 9.9 percent to a record NZ$41.00 a share.
Reporting by Thuy Ong and Gyles Beckford; Editing by Shri Navaratnam