By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Jan 27 (Reuters) - Australian shares fell 0.7 percent on Wednesday, led by losses in energy and banking stocks, while New Zealand and much of Asia put on modest gains on Wall Street's strength.
But sentiment in financial markets was fragile as oil prices, which bounced overnight, fell yet gain. share markets extended Tuesday's rout, falling more than 1 percent and underscoring a nervous backdrop as investors brace for the U.S. Federal Reserve's policy decision later in the global day.
The S&P/ASX 200 index .AXJO dipped 33.5 points to 4,972.5 by 0257 GMT, having rallied 1.8 percent Monday. It was still well off a two-year trough of 4,803.9 touched last week.
The downturn in oil drove WorleyParsons WOR.AX down 8.3 percent. Oil Search OSH.AX fell nearly 5 percent after it reported a 10 percent drop in quarterly revenue due to lower oil and gas prices. Energy ORG.AX skidded 4.6 percent, pulling closer to a 11-year trough touched last week.
Financial stocks also came under pressure, with Commonwealth Bank of Australia CBA.AX , ANZ Banking Group ANZ.AX and National Australia Bank NAB.AX all down more than 1 percent.
Mining stocks edged lower, with BHP Billiton (L:BLT) BHP.AX down 0.3 percent, while Rio Tinto (L:RIO) RIO.AX shed 1.2 percent, not far from its weakest since 2009. Fortescue Metals FMG.AX skidded 3.2 percent.
The discretionary sector, however, bucked the market with consumer electronics retailer JB Hi-Fi JBH.AX up 2.5 percent, nudging closer to a record peak touched in 2009.
Across the Tasman sea, New Zealand's benchmark S&P/NZX 50 index .NZ50 was in positive territory, up 0.3 percent or 19.77 points to 6,161.52.
A2 Milk ATM.NZ posted the biggest gains, trading up 3.8 percent and reversing its 1 percent loss the previous session.
Accounting software company Xero XRO.NZ rose 2.6 percent and Meridian Energy MEL.NZ increased 2.2 percent.
Telecommunications company Spark SPK.NZ rose 1.1 percent after Morningstar raised its rating to hold from reduce. Tube STU.NZ led losses, falling 0.9 percent, while
Kiwi Property Group KPG.NZ edged down 0.3 percent after releasing sales growth figures. on the move
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(Editing by Shri Navaratnam)