News: RIO Australia shares stumble as bank stocks sell off, NZ ticks up

(Updates to close)

July 18 (Reuters) - Australian shares faltered on Tuesday as banks were sold off and Rio Tinto stocks slipped after the company cut its 2017 iron ore guidance.

The S&P/ASX 200 index (xjo) fell 65.87 points, or 1.14 percent, to 5,689.6 at 0606 GMT. The benchmark dipped 0.2 percent on Monday.

Rio Tinto (RIO), the world's second-largest iron ore producer, sagged 1.4 percent after it trimmed its 2017 iron ore guidance for 2017 because of bad weather and work to modernise its rail lines.

The 'Big Four' banks, the quartet that account for more than 80 percent of the country's lending, ended between 1.6 percent to 1.9 percent lower.

"It was led lower by a selloff in banks which took about 30 points out of the index. Rio released FY guidance which sees softer iron ore, leading the miners lower," said Peter Spanos, Volatility Risk Manager, CMC Markets.

Investors expect capital changes for banks because the government is planning to expand the powers of the Australian Prudential Regulatory Authority (APRA).

The benchmark index of financial stocks .AXFJ fell as much as 1.9 percent, to its lowest in nearly four weeks.

"U.S. Futures and Far East markets have been sold off in general so that selling pressure has obviously continued," Spanos added.

Wall Street ended flat in lacklustre trade on earnings news. [.N]

New Zealand's benchmark S&P/NZX 50 index (nz50) rose 7.76 points, or 0.101 percent, to 5,689.6 at 0607 GMT.

Gains in materials and utilities outweighed losses, primarily from the healthcare sector, in the index.

Fisher and Paykel Healthcare Corporation (FPH) led decliners while CBL Corporation (CBL) led gainers.

New Zealand's inflation slowed more than expected in the second quarter, vindicating the central bank's determination to maintain its monetary policy stance.