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Australia shares dragged down by financials; NZ extends losses

[SYDNEY] Australian shares fell on Monday, pulled down by losses in financial stocks as the sector was hit after Australia's prudential regulator said it would establish an inquiry into Commonwealth Bank of Australia (CBA).

Australia's benchmark S&P/ASX 200 index fell 0.7 per cent, or 40.061 points, to 5,703.8 by 0219 GMT.

The financial index fell one per cent to its lowest in two months as Australia's four biggest banks lost between 0.8 per cent and 2 per cent.

Australian Prudential Regulation Authority (APRA) said in a statement on Monday it will establish an inquiry into CBA following the bank's alleged breaches of money-laundering and counter-terrorism finance rules, after Australian Securities and Investment Commission launched its own probe.

"There's been further news about what's happening with CBA, and maybe that's taking a few points out of the market," said Chris Weston, an institutional dealer with IG Markets.

Mining stocks were lower as iron ore prices declined more than 4 per cent after nearly returning on Friday to a five-month high hit early last week.

Major miners Rio Tinto Ltd and Fortescue Metals Group Ltd fell as much as 1.1 per cent and 1.8 per cent, respectively. BHP shares were one per cent higher on support from oil prices.

"The iron ore futures are down about 4 per cent, so that's probably why we're seeing such pressure on pure iron ore players," said Michael McCarthy, chief market strategist at CMC Markets.

Gasoline prices soared to two-year highs on Monday as floods caused by Hurricane Harvey forced refineries across the US Gulf Coast to shut down, while Brent crude futures were 0.3 per cent higher.

Energy stocks rose with Santos Ltd and Woodside Petroleum up 2.5 per cent and 0.2 per cent respectively. Transport fuel supplier Caltex Australia Ltd was up as much as 1.4 per cent.

New Zealand's benchmark S&P/NZX 50 index fell 0.3 per cent, or 27.36 points, to 7,830.45.

New Zealand shares extended losses for a third session, dragged down by the telecommunications and consumer staples sectors.

Chorus Ltd, the biggest loser on the index, fell as much as 5.7 per cent after its full-year profit after tax of NZ$113 million (S$110.94 million) missed analysts' estimates of around NZ$127.4 million.

A2 Milk Company Ltd the second biggest drag on the index fell as much as 2.8 per cent, after hitting a record high in its previous session.