SYDNEY: Australian shares fell 1 percent early on Tuesday as renewed doubts about the euro zone's debt crisis plan spooked investors, who were are also awaiting the central bank rate decision.
Fading optimism on a lasting cure for the euro zone's debt woes knocked oil and other commodity prices, hurting resources stocks.
BHP Billiton and Rio Tinto were both down at least 2 percent.
Qantas Airways bucked the trend to climb 2.8 percent. The airline returned to the air on Monday after grounding its entire global fleet over the weekend in a bold tactic to force the government to intervene in the nation's worst labour dispute in a decade.
"The main driver is the global falls, which in turn is pulling us down," Shane Oliver, head of investment strategy at AMP Capital Investors said.
The benchmark S&P/ASX 200 index fell 1.92 points to 4,256.2 by 2347 GMT. It fell 1.3 percent on Monday but still notched up its best month in October since July 2009.
Investors are awaiting the outcome of the Reserve Bank of Australia's (RBA) policy meeting at 0030 GMT which could well deliver the first cut in rates since April 2009.
If the central bank holds rates then it might spark a broader sell off as a cut has been priced in, Oliver said.
New Zealand's benchmark NZX 50 index dropped 0.04 percent at 3,333.96 points.
STOCKS ON THE MOVE
Retailers were largely down ahead of the central bank rate decision with Myer and David Jones off by at least 3 percent. Harvey Norman was under severe pressure dropping 5 percent after its quarterly sales fell.
Top banks were all lower as Europe's debt crisis and the central bank rate decision weighed on sentiment. These two factors are crucial for banks cost of funds. Westpac Banking Corp , the third-largest lender, led losses, falling 1.3 percent.
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