* Resource sector drops as iron ore continues to slump
* Market set to end 0.3 percent higher for May (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Gyles Beckford
SYDNEY/WELLINGTON, May 30 Australian shares were down 0.3 percent on Friday morning, as an extended slide in iron ore prices hit the index-heavy resource sector, though an uptick on Wall Street and Australian private sector credit helped limit the downside.
Prices of iron ore, a major export for Australia, fell to its lowest level since September 2012 and look poised for further losses amid a deepening glut.
The world's no.4 iron ore miner Fortescue Metals Group Ltd tumbled 1.8 percent. Bellwether miners BHP Billiton Ltd and Rio Tinto Ltd lost 0.5 percent and 1.1 percent respectively, while Bluescope Steel Ltd dropped 0.8 percent.
The S&P/ASX 200 index slipped 17.4 points to 5,502.1 by 0222 GMT. The benchmark is set to add 0.2 percent for the week and 0.3 percent for May.
On Wall Street, the S&P 500 index climbed to its third record closing high in four sessions overnight, while Australian private sector credit rose 0.5 percent in April, helping check overall selling interest..
"It has been really quiet in the past two weeks in terms of conviction by investors both on the buy side and the sell side so trading volume is even lower," said Martin Lakos, division director at Macquarie Bank.
Lakos said markets were also eyeing key GDP data and the Reserve Bank of Australia's policy meeting next week for fresh catalysts.
The Australian benchmark touched a near 6-year high of 5,54.5 on April 29, and has traded mostly sideways for May as the slump in iron ore prices hit resource stocks, though overall market losses have been contained by demand for high yielding bank stocks.
The 'Big Four' banks fell on Friday, with Westpac Banking Corp down 0.4 percent, while Australia and New Zealand Banking Corp lost 0.3 percent.
The housing sector edged higher, boosted by Australand Property Group which climbed 2.3 percent after issuing a profit upgrade on Friday. The upgrade came two days after the firm received an increased takeover bid from larger rival Stockland Corp Ltd which valued it at A$2.5 billion.
Stockland added 0.9 percent. Elsewhere, Mirvac Group jumped 1.8 percent to A$1.80, its highest since October.
Lynas Corporation slumped 17.7 percent to A$0.14 after the company underwent a share purchase plan with a discounted price of A$0.113 per share. Lynas had closed at A$0.17 in the previous session.
New Zealand stocks were largely flat in subdued trading going into a long weekend, with the benchmark NZX-50 index down 1.2 points at 5,181.96.
The most significant mover was dairy company Synlait Milk Ltd, which tumbled 7.3 percent to a near-11 month low of NZ$3.15, after it cut its 2015 profit forecast, as well as its indicative farmer payout.
(Editing by Shri Navaratnam)