(Reuters) - Australian shares fell the most in five weeks on Monday as better-than-expected U.S. employment data softened expectations for a Federal Reserve rate cut this month.
The S&P/ASX 200 index <.AXJO> slid 1.2% or 79.10 points in lacklustre trading to end at 6,672.20, its biggest one-day drop since June 3. The benchmark firmed 0.5% on Friday.
Stock markets that had rallied on expectations of a U.S. monetary policy easing in July came under pressure on Monday after strong U.S. non-farm payrolls on Friday showed the world's largest economy remained on track.
"The June payrolls number threw a spanner in the works for those participants looking for a 50bp cut to the Federal Funds rate at the upcoming FOMC meeting," ANZ Research said in a note.
"This was the strongest non-farm payrolls print since January this year and suggests the U.S. economy still has firm footing," it added.
Investors will focus on Fed Chairman Jerome Powell's semi-annual testimony to Congress on Wednesday and Thursday for more cues on the near-term outlook for monetary policy.
Mining stocks <.AXMM> hit a near three-week trough, leading decliners. BHP Group <BHP.AX> fell to its lowest since June 18, while rival Rio Tinto Ltd <RIO.AX> hit a two-week low.
The reduced chances for a Fed rate cut tarnished gold mining stocks, with the sector ending down 0.7%.
In financials, the "Big Four" banks dropped between 0.8-1.2%.
In New Zealand, the benchmark S&P/NZX 50 index <.NZ50> closed little changed at 10,605.98.
Local-listed shares of Westpac Banking Corp <WBC.NZ> and Australia and New Zealand Banking Group <ANZ.NZ> were the top drags on the benchmark.
(Reporting by Aditya Soni in Bengaluru; editing by Darren Schuettler)
