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SYDNEY, March 3 (Reuters) - Australian shares slipped 1 percent in their biggest one-day fall on Monday morning, as escalating tensions in Ukraine prompted selling in riskier assets led by losses in mining and banking stocks.
Washington threatened to isolate Russia economically after President Vladimir Putin declared he had the right to invade his neighbour in Moscow's biggest confrontation with the West since the Cold War.
The tense backdrop weighed on U.S. stock index futures, with the S&P 500 stock price futures slipping 0.8 percent.
"It's clearly due to what's going on in Ukraine, and a bit of nervous tension about that," said Michael Heffernan, a senior client adviser and economist at broker Lonsec.
Blue-chip miners BHP Billiton Ltd lost 2.7 percent as it traded ex-dividend and rival Rio Tinto Ltd lost 0.9 percent. Copper ended flat for the month while iron ore stretched its losing streak to a third straight month on Friday.
The S&P/ASX 200 index fell 53.9 points to 5,350.9 by 0023 GMT, its biggest one-day loss since February 4.
The benchmark eased on Friday, but posted a 4.1 percent gain for February, as an upbeat earnings season saw a rebound from a loss of 3 percent in January.
Adding to the strain on sentiment, a government survey on Saturday showed activity in China's factory sector slowed to an 8-month low in February, reinforcing signs of a modest slowdown in the world's second biggest economy. China is Australia's biggest export market.
The 'Big Four' banks all lost ground with Westpac Banking Corp fell 1.1 percent and Australia and New Zealand Banking Group shed 0.8 percent.
Lonsec's Heffernan said that investors were also cautious ahead of a raft of data including GDP, retail sales, and trade balance later in the week. The Reserve Bank of Australia's policy meeting is also due on Tuesday.
Earlier on Monday, a private gauge of Australian inflation showed a pickup in both headline and underlying measures of price pressures for February, suggesting there could be diminishing scope for further cuts in interest rates.
Elsewhere, gold stocks rose as investors booked into the safe-haven commodity. Newcrest Mining Ltd gained 3.5 percent while Beadell Resources Ltd rallied 7.2 percent.
Transpacific Industries Group Ltd added 0.6 percent after announcing it will sell its New Zealand waste management business to Beijing Capital Group for NZ$950 million.
Worley Parsons Ltd dropped 1.6 percent as it traded ex-dividend. The project delivery and consulting services firm was also awarded a Canadian bitumen refinery project worth approximately CAD$130 million.
New Zealand's benchmark NZX 50 index slipped 0.3 percent to 4,974.0.
(Reporting by Thuy Ong and Maggie Lu Yueyang; Editing by Shri Navaratnam)