* All sectors dragged down by uncertainty
* 186 shares down, 9 up and 5 unchanged (Adds analysis, quotes, stocks on the move)
By Pauline Askin and Cecile Lefort
SYDNEY/WELLINGTON, Sept 21 (Reuters) - Australian shares fell 2.6 percent on Monday, tracking negative cues from Wall Street after the U.S. Federal Reserve's decision to keep interest rates on hold last week sparked uncertainty about global growth.
The S&P/ASX 200 index .AXJO fell 133 points to 5,036.9 by 0218 GMT, its biggest percentage fall in almost a month. The benchmark is at its lowest level in nearly a week after three straight sessions of gains. It rose 0.5 percent on Friday.
"The market is thinking the Fed is seeing something that nobody else is and that is the reason why they didn't tighten", said Damien Boey, equity strategist, Credit Suisse (SIX:CSGN).
"The big concern for the Australian market is the same as the concern in the U.S. - trying to read what's on the Fed's mind," he said, adding volatility in shares will continue.
Recent volatility in shares globally has unsettled investors as concerns about a global slowdown in the wake of China's market turmoil continue to weigh on sentiment, compounded by the Fed's decision to hold interest rates steady.
"It's not impossible to arrest (volatility) but it needs recognition of the problem before we can arrest it."
Financial stocks were hit hard with Westpac WBC.AX down 3.8 percent, Commonwealth Bank of Australia CBA.AX , ANZ ANZ.AX and NAB NAB.AX down almost 3 percent, respectively.
Miners also weighed on the index with BHP Billiton (LONDON:BLT) BHP.AX and Rio Tinto (LONDON:RIO) RIO.AX losing more than 3 percent each, while Fortescue shed nearly 2 percent.
Energy stocks such as Woodside Petroleum WPL.AX lost 3.9 percent and Beach Energy BPT.AX plunged 4.6 percent.
New Zealand's benchmark NZX50 share index .NZ50 eased 0.58 percent to 5,677.9, but was still near four-week highs of 5,723.55 touched last week.
Investors were looking for inspiration as the focus returned to global growth concerns.
Energy stocks sagged after another tumble in oil prices on Friday, with Contact Energy CEN.NZ off 1.4 percent and Genesis Energy GNE.NZ down 0.5 percent. Fletcher Building FBU.NZ was another casualty, off nearly 2 percent.
In contrast, outdoorwear company Kathmandu Holdings KMD.NZ was a clear outperformer, up 9.29 percent after Briscoe Group's BGR.NZ takeover offer lapsed last week.
Dairy giant Fonterra FSF.NZ gained 1.57 percent after it said it would cut more jobs than previously flagged. It had said in July that the cuts would result in payroll savings.
The most actively traded stock was telecom company Spark SPK.NZ , up 0.16 percent. (Editing by Jacqueline Wong)