By Nicole Pinto
Aug 28 (Reuters) - 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 .AXJO fell 0.7 percent, or 40.061 points, to 5,703.8 by 0219 GMT.
The financial index .AXFJ fell 1 percent to its lowest in two months as Australia's four biggest banks lost between 0.8 percent and 2 percent.
Australian Prudential (LON:PRU) 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. 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 DCIOcv1 declined more than 4 percent after nearly returning on Friday to a five-month high hit early last week. IRONORE/
Major miners Rio Tinto (LON:RIO) Ltd RIO.AX and Fortescue Metals Group Ltd FMG.AX fell as much as 1.1 percent and 1.8 percent, respectively. BHP BHP.AX shares were 1 percent higher on support from oil prices. O/R
"The iron ore futures are down about 4 percent, 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 RBc1 soared to two-year highs on Monday as floods caused by Hurricane Harvey forced refineries across the U.S. Gulf Coast to shut down, while Brent crude futures LCOc1 were 0.3 percent higher.
Energy stocks rose with Santos Ltd STO.AX and Woodside Petroleum WPL.AX up 2.5 percent and 0.2 percent respectively. Transport fuel supplier Caltex Australia Ltd CTX.AX was up as much as 1.4 percent.
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New Zealand's benchmark S&P/NZX 50 index .NZ50 fell 0.3 percent, 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 CNU.NZ , the biggest loser on the index, fell as much as 5.7 percent after its full-year profit after tax of NZ$113 million ($81.8 million) missed analysts' estimates of around NZ$127.4 million. Milk Company Ltd ATM.NZ the second biggest drag on the index fell as much as 2.8 percent, after hitting a record high in its previous session.