(Adds analysis, quotes, stocks on the move)
SYDNEY, April 7 Australian shares fell 0.2 percent on Monday morning after a disappointing performance on Wall Street despite solid U.S. jobs numbers on Friday, though Wesfarmers rose after the company said it was selling its insurance businesses.
Heavy eight banking stocks, which have had a stellar run in recent months, weighed on the broader market as investors took some money off the table.
The 'Big Four' banks lost ground, with Westpac Banking Corp off 0.5 percent and Commonwealth Bank of Australia , the nation's largest bank by market capitalisation, shed 0.1 percent.
"Their valuations have become stretched," said Matthew Sherwood, head of investment market research at Perpetual in Sydney.
"What we have to remember with the banks is that they're at the bottom of their bad and doubtful debt cycles, credit growth isn't really accelerating, there's intense competition which is pressing down margins."
The S&P/ASX 200 index fell 12.9 points to 5,409.9 by 0125 GMT. The benchmark tacked on 0.2 percent on Friday and 1 percent for the week, its third consecutive week of gains.
In Friday's session on Wall Street, the big drop in momentum stocks overshadowed the day's relatively strong March jobs data, with the Dow Jones industrial average off 0.96 percent, and the Nasdaq losing 2.6 percent, its worst daily percentage loss since February.
A handful of defensives also fell with Australia's biggest telecommunications provider Telstra Corporation Ltd fell 0.5 percent, while biotechnology firm CSL Ltd lost 0.4 percent.
Index heavyweight Wesfarmers Ltd bucked the trend, adding 0.8 percent after agreeing to sell its insurance broking and premium businesses to Arthur J. Gallagher & Co for A$1.01 billion.
Perpetual's Sherwood said the market is also being held back by the absence of major catalysts. "There's not going to be a lot around to give investors renewed confidence."
Mining stocks were down after copper slipped on persistent investor concerns about slowing growth in top consumer China. BHP Billiton Ltd fell 0.3 percent and Rio Tinto Ltd slipped 0.2 percent. An Australian court on Monday ruled against a proposal by Rio Tinto to expand its Warkworth coal mine in New South Wales, placing the mine's future in jeopardy.
The gold sector benefited after bullion rose 1 percent on Friday, its biggest gain in nearly a month thanks to the brisk U.S. employment growth in March. Among gold miners, Newcrest Mining Ltd climbed 2.1 percent, while Regis Resources Ltd jumped 2 percent.
Iron Road Ltd bounced 6.5 percent after the company cleared a key regulatory hurdle for its Central Eyre iron project, with the potential to generate annual forecast revenues of $2.8 billion.
New Zealand's benchmark NZX 50 index fell 0.7 percent to 5,088.9.
(Reporting by Thuy Ong; Editing by Shri Navaratnam)