(Adds analysis, quotes, stocks on the move)
SYDNEY Jan 14 Australian shares lost 1.1 percent on Tuesday, its biggest one day loss in six weeks, after Wall Street tumbled overnight as investors exercise caution ahead of the corporate reporting season and iron ore prices fell to near-record lows.
Bluechip stocks all fell in a broadbased selloff. Among the Big Four banks, the Commonwealth Bank of Australia fell 0.9 percent while Westpac Banking Corp lost 0.8 percent.
The defensives sector also tumbled with consumer staple retailers Wesfarmers Ltd and Woolworths Ltd down 1.2 percent and 1.1 percent each while Australia's biggest telephone company Telstra Corporation Ltd shed 0.5 percent.
The S&P/ASX 200 index lost 55.6 points to 5,236.5 by 0007 GMT, its lowest point since December 20. The benchmark fell 0.4 percent on Monday.
"A key concern of market participants, given the exceptional run in 2013, is whether the run can continue in 2014 even amid the winding back of Fed stimulus," said Tim Radford, global analyst at Rivkin Securities in a note.
"For the rally to remain sustainable, it could be healthy to see a meaningful pullback in equities over the short-term, allowing for bullish optimism to subside to less bearish levels."
Heavyweight iron ore miners BHP Billiton Ltd and Rio Tinto Ltd dropped 1.2 percent and 0.9 percent after Chinese iron ore futures fell 1 percent to their lowest since contracts were launched in October, as weaker steel prices curbed demand for the raw material. World no.4 iron ore miner Fortescue Metals Group Ltd slipped 0.4 percent.
U.S. stocks tumbled on Monday on caution ahead of corporate results, as a growing number of negative pre-announcements dimmed the profit growth outlook.
Elsewhere, the market's only reprieve was the gold sector as bullion rose to a one-month high as fresh losses in U.S. equities triggered safe-haven buying. Newcrest Mining Ltd climbed 1.4 percent while Alacer Gold Corp jumped 3.5 percent.
Forge Group Ltd dropped 11.6 percent after the engineer warned on Tuesday that miners' cutbacks on new projects and cost overruns of up to A$28 million on a key project for Rio Tinto had forced it to line up assistance from its lenders.
Altium Ltd soared 8.6 percent to A$2.64, its highest price since November, after the electronics design software company said its half-year sales were $3.1 million, an increase of 10 percent compared to the previous corresponding period.
Coalspur Mines Ltd climbed 8.5 percent to four-month highs after the company said a regulator had closed its hearing relating to its application for the approval of its Vista project.
New Zealand's benchmark NZX 50 index slipped 0.5 percent to 4,875.2.
(Reporting by Thuy Ong; Editing by Eric Meijer)