Australia shares lose 1 pct ahead of RBA meeting

* ASX 200 loses 1.1 percent in choppy trade, financials sold off

* 23 shares higher, 167 shares lower, 9 shares unchanged

* Investors eye result of RBA's policy meeting (Adds analysis, quotes, stocks on the move)

By Thuy Ong and Naomi Tajitsu

SYDNEY/WELLINGTON, Oct 7 (Reuters) - Australian shares slumped 1.1 percent to eight-month lows on Tuesday as weakness on Wall Street dampened investor sentiment and news was awaited from a Reserve Bank of Australia policy meeting.

Commonwealth Bank of Australia (Other OTC: CBAUF - news) dropped 1.4 percent, and Westpac Banking Corp declined 1.3 percent. Insurance companies QBE Insurance Ltd (Other OTC: QBEIF - news) tumbled 2.4 percent to one-month lows of A$11.44 and Suncorp Group Ltd was down 2.2 percent.

The S&P/ASX 200 index dumped 56 points to 5,236.9 by 0207 GMT after trading at a high of 5,319.6 earlier in the session. The benchmark fell 0.5 percent on Monday.

The index lost 5.9 percent in September, erasing year-to-date gains as a rise in bond yields, China's slowing growth and a slump in iron ore prices curbed appetites for local equities. For the year, the benchmark has lost 2.2 percent.

Iron ore for immediate delivery to China was hovering at a two-week high of $78.90 a tonne. The materials space gave a modest uptick, the only sector on the ASX 200 in the black. Iron ore miners BHP Billiton Ltd and Rio Tinto Ltd added 0.6 percent and 3.8 percent.

Rio said on Tuesday it rejected a merger approach from smaller rival Glencore Plc (Xetra: A1JAGV - news) in August to create a $160 billion mining and trading giant.

Consumer cyclicals saw declines, with Nine Entertainment Co losing 0.3 percent and casino operator Crown Ltd 1.1 percent.

U.S. stocks slipped in choppy trading overnight, with traders nervoyusly eyeing the start of earnings season, while the S&P 500 failed to remain above a key technical level.

"Clearly the outlook for the Australian economy is in a very different place to the U.S. economy for instance - they're hanging on very solid recovery and ongoing, whereas we're below subtrend growth," said John Milroy, investment adviser at Macquarie Bank.

Investors await the RBA's comments about Australia's labour market, housing markets and macroprudential lending, Milroy said.

Markets are pricing in a 2 percent chance of a rate cut .

Regis Healthcare Ltd debuted at a 5.5 percent premium to its offer price of A$3.65.

Australian Bauxite Ltd soared 13.8 percent to A$0.33, a two-year high after saying it in negotiations with a number of parties for financing arrangements for developing the Bald Hill mine in Tasmania.

New Zealand's benchmark NZX50 index slipped 12.0 points to 5,229.27, after a survey showing a slide in domestic business sentiment suggested that economic growth is slowing after a period of outperformance in the past year.

Telecommunications network operator Chorus fell 1 percent to NZ$1.83 ($1.43), pulling further away from a 10-month high of NZ$1.88 hit last week.

Shares (Berlin: DI6.BE - news) eased after the company, locked in a regulatory battle with the country's Commerce Commission, on Tuesday said it expected the commission to value the cost of rebuilding its copper network below its own estimate. (Editing by Richard Borsuk)