* Major Chinese commodity indexes down by daily limits
* Oil Search drops to lowest close in four months
* NZ benchmark closes at 3-week low (Updates to close)
By Soumyajit Saha
Feb 3 (Reuters) - Australian shares dropped on Monday, in line with broader Asia, as financial markets in China slumped on fears that a fast-spreading coronavirus epidemic would slow global economic growth.
The S&P/ASX 200 index .AXJO fell 1.3% to 6,923.3 points at the close of trade, its lowest in three weeks. The benchmark rose 0.13% on Friday.
"There is very clear commitment in today's selling with volumes well ahead of the average. Investors are looking for safe havens and moving away from riskier assets." said Michael McCarthy, chief market strategist at CMC Markets.
Trading volumes during the session were 1.2 times of the 30-day average, according to Refinitiv data.
Mining stocks .AXMM dropped 1.3% and dominated the losses after metals prices in China slumped. BHP Group BHP.AX and Rio Tinto (LON:RIO) Ltd RIO.AX lost 2.6% and 1.9%, respectively.
Investors on Monday dumped equities and commodities futures in China, Australia's biggest trade partner, as markets resumed trading after an extended Lunar New Year break. a move to soothe frayed nerves, China's central bank injected 1.2 trillion yuan ($173.8 billion) of liquidity into the markets and cut reverse repo rates by 10 basis points.
However, a drop in oil prices sent Australian energy stocks .AXEJ 4.1% lower to their weakest close in over two months.
Oil Search Ltd OSH.AX dropped 7% after negotiations on the P'nyang gas project between Papua New Guinea and Exxon Mobil (NYSE:XOM) XOM.N collapsed. .AXFJ fell more than 1%, with the "Big Four" banks losing between 0.7% and 1.8%.
Investors now await the central bank's interest rate decision on Tuesday, with policymakers expected to hold the cash rate at a record low of 0.75%, according to a Reuters poll. Zealand's benchmark S&P/NZX 50 index .NZ50 fell 1.4% to its lowest close in three weeks.
Shares of a2 Milk Co Ltd ATM.NZ , which has a large customer base in China, ended 2.3% lower, while Restaurant Brands New Zealand Ltd RBD.NZ lost 2.6%.