* Energy stocks drop to over two-month lows
* Oil Search hits lowest level since Aug 2019
* NZ benchmark index touches over one-month low
By Shreya Mariam Job
Feb 3 (Reuters) - Australian shares fell to three-week lows on Monday as mounting worries about the global economic impact of the new coronavirus outbreak in China curbed risk appetite and spurred a wider sell-off in the domestic market.
The S&P/ASX 200 index .AXJO dropped 1.5%, or 106.9 points, to 6,911.10 by 0035 GMT after a 0.1% gain on Friday.
The focus was on how the Chinese financial markets would fare when they reopen later, after the Lunar New Year holiday was extended to help contain the flu-like virus that has killed as many as 350 people in the central province of Hubei. stock futures fell more than 7% during Jan. 24 to 31, said Michael McCarthy, chief market strategist at CMC Markets.
The world's second-largest economy has taken a heavy hit from the travel curbs and business shutdown due to the epidemic, prompting the central bank to unveil a plan to inject a hefty 1.2 trillion yuan ($173.81 billion) worth of liquidity into the markets via reverse repo operations on Monday. is a bit of market panic going on at the moment (in Australia)," said Michael McCarthy, chief market strategist at CMC Markets.
Selling was broad-based with nine stocks declining for every one stock in the green.
Energy stocks .AXEJ were the worst hit, falling as much as 4% to a more than two-month low. A fall in oil prices on Friday and an 11.5% drop in shares of Oil Search Ltd OSH.AX weighed heavily on the sub-index.
Oil Search dropped to its lowest level since August last year after negotiations on the P'nyang gas project between Papua New Guinea and Exxon Mobil (NYSE:XOM) XOM.N collapsed. .AXFJ , which account for a large share of the benchmark, dropped 1.8%. The "Big Four" banks fell in a range of 1.3% to 2.4%.
Investors now await the Australian central bank's policy rate decision expected on Tuesday, where the cash rate is expected to be held at a record low of 0.75%. commentary will be very important," McCarthy said. "We do expect to see some language around the risks posed by the coronavirus if not flagging some potential responses to those concerns."
Material stocks .AXMM dropped 2.3%, despite gains in gold miners on safe-haven bets amid sharp volatility in financial markets.
Heavyweight miners BHP Group BHP.AX and Rio Tinto (LON:RIO) Ltd RIO.AX dropped as much as 3.5% and 2.7%, respectively.
Meanwhile, Newcrest Mining NCM.AX and Northern Star Resources NST.AX rose 1.7% and 4.5%, respectively.
New Zealand's benchmark S&P/NZX 50 index .NZ50 fell to a one-month low and was last down 1.7%, or 193.22 points, to 11,524.22.
Shares of A2 Milk Co ATM.NZ , which has a large customer base in China, slumped 4.8%, while those of Fonterra SHareholders' Fund FSF.NZ slid 1%.
($1 = 6.9040 Chinese yuan)