(Adds details, comments, stocks on the move)
SYDNEY, March 18 (Reuters) - Australian shares dropped 1.4 percent on Monday as uncertainty over the impact of a proposed bank bailout for Cyprus, a break in the Dow Jones industrial average’s 10-day rally, and weak metal prices hit mining and financial stocks.
Banks fell, Westpac Banking Corp posted the biggest loss of 1.7 percent.
Blue chip iron ore miners BHP Billiton Ltd lost 2 percent while rival Rio Tinto Ltd plumbed 1.8 percent.
Iron ore sank to its weakest in three months on Friday, hurt by a drop in buying interst from top importer China reflecting poor steel demand.
The S&P/ASX 200 index was 69.2 points lower at 5,051 by 0032 GMT. The benchmark added 1.8 percent on Friday, its biggest one-day rise in eight months.
“I think the market was definitely being a bit overbought over the last couple of weeks and months so this correction was a bit overdue,” said Damien Boey, equity strategist at Credit Suisse.
“I am worried about the underlying causes of this correction, because I think that they are a bit longer-term in nature.”
An underlying cause, Boey said, was investors becoming complacent about bailouts, expecting central banks and policy makers to act at whatever the cost.
Cyprus’s parliament has postponed until Monday an emergency session to vote on a levy on bank deposits after signs that lawmakers might block the surprise move agreed in Brussels to help fund a bailout. The particular state of Cyprus’s banks is seen as a reason for the levy, which has been shunned in previous rescues.
Defensives were weaker, food retailer Woolworths Ltd dropped 2.8 percent while rival Wesfarmers Ltd fell 0.9 percent. Blood products maker CSL Ltd lost 2.1 percent while energy utility provider AGL Energy was down 1 percent.
Bucking the market, gold miners were firmer helping to cap losses on the index. Newcrest Mining Ltd rallied 1.9 percent while Regis Resources Ltd climbed 3.3 percent.
U.S. stocks slipped on Friday, ending the Dow Jones industrial average’s longest wining streak since 1996 as investors paused just below the S&P 500’s record high.
New Zealand’s benchmark NZX 50 index lost 1.1 percent or 49.8 points, to 4,337.2.
* Aurizon Holdings Ltd added 0.9 percent to A$4.08 after the government of Australian state Queensland sold a 9 percent stake in the country’s largest rail freigh company for A$806 million.
* Sirius Resources plumbed 4.6 percent to A$4.76 after the company reported high grade nickel hits in the first Bollinger Holes.
* ASG Group Ltd was up 13 percent after the IT company received a non-binding and conditional acquisition proposal at an indicative cash price of $0.68 per share.
Reporting by Thuy Ong; Editing by Eric Meijer