Australia shares burdened by banks, NZ gives ground

[BENGALURU] Australian shares lost traction on Tuesday as investors turned cautious ahead of a speech by British Prime Minister Theresa May to lay out plans to exit the European Union, which some traders fear will see Britain lose access to the bloc's single market.

The S&P/ASX 200 index ended 0.9 per cent, or 49.041 points lower. The benchmark rose 0.5 per cent on Monday.

Britain will not seek a Brexit deal that leaves it "half in, half out" of the EU, Ms May will say later in the day, according to her office, in a speech setting out her 12 priorities for upcoming divorce talks with the bloc.

Those priorities will include leaving the EU's single market and regaining full control of Britain's borders, media reported, reinforcing fears of a 'Hard Brexit' which has pushed the pound to some of the lowest levels against the US dollar in more than three decades and weighed on other riskier assets such as stocks.

Australia's "Big 4" banks dominated losses, with National Australia Bank declining as much as 1.8 per cent to a near three-week low.

Iron ore pulled back from a three-year high, dragging index heavyweights South32 and Fortescue Metals Group down as much as 3.7 per cent and 3.9 per cent, respectively.

Global mining giant Rio Tinto slipped as much as 1.3 per cent, even though its results were in line with expectations.

It reported output and shipments for 2016 in line with its guidance and kept its targets for 2017 intact, expecting to ship 330 million-340 million tonnes of iron ore.

Bucking the trend, gold prices rose as investors rushed to the safe haven asset, with Newcrest Mining up 1.7 per cent.

New Zealand's benchmark S&P/NZX 50 index closed almost 0.2 per cent, or 11.98 points lower, at 7,062.96.

Overall sentiment echoed its Australian counterpart despite reports that New Zealand's business confidence rose to a two-year high in the fourth quarter, rekindling hopes that the central bank will keep interest rates on hold next month, after three cuts last year.

Industrials were the biggest drag, with Air New Zealand down as much as 2.2 per cent, leading losses in the benchmark.

Z Energy closed over one per cent lower, its biggest one-day loss in over four weeks.

Dairy giant Fonterra Co-operative Group inched higher ahead of the NZ Dairy prices and NZ Milk Auctions data due later in the day.

REUTERS