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Banks drag on Australia shares ahead of inquiry report; NZ rises

[BENGALURU] Financial stocks pulled Aussie shares lower on Thursday as banks fell ahead of a powerful inquiry's final report due next week, offseting optimism stemming from US Federal Reserve's dovish outlook.

The S&P/ASX 200 index closed down 0.4 per cent or 22.0 points at 5,864.70 but still posted a monthly gain of 3.9 per cent, its first since August. The benchmark rose 0.2 per cent on Wednesday.

Financial stocks fell 1.5 per cent to a near four-week low.

"With the banks, it seems to be the nervousness ahead of the royal commission, while for Janus Henderson, its the news that they're closing more funds. Its a pretty tough place to be," said Damian Rooney, director of equity sales at Argonaut.

The Royal Commission, which has revealed widespread wrongdoing at Australia's top financial institutions, is slated to release its final report on Feb 4, with investors bracing for unprecedented regulatory attention on some the world's most profitable banks.

The country's "Big Four" banks lost between 1.6 per cent and 2.5 per cent each on Thursday.

Meanwhile, Australia-listed shares of Janus Henderson dropped 3.3 per cent after it said on Wednesday it would close down three of its Australian equities funds.

The news comes as other fund managers in Australia have flagged a plunge in first-half earnings on increased volatility and equity market selloffs in the last quarter of 2018.

Elsewhere, mining stocks gained on higher commodities prices and the Fed's pledge to be patient with future rate hikes.

The metals and mining index rose 1.0 per cent to close higher for a fourth straight session. Buoyed by higher iron ore prices and China's stimulus promise it has added 8.7 per cent this month.

The world's biggest miner BHP Group firmed 0.7 per cent, while Fortescue Metals Group climbed to a near one-and-half-year high after reporting a 5 per cent rise in second quarter iron ore shipments.

Energy stocks rose 1 per cent, benefiting from a jump in oil prices.

Oil Search Ltd advanced 2.2 per cent, whereas Beach Energy Ltd posted a 5.6 per cent hike.

In New Zealand, the benchmark S&P/NZX 50 index rose 0.7 per cent or 59.820 points to finish the session at 8,985.340.

Dairy giant a2 Milk Co was the top percentage gainer on the benchmark, closing 3.7 per cent up.