* Miners drop as iron ore prices slump to near 20-month low
* Banks offer some support in a sideways moving market (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Gyles Beckford
SYDNEY/WELLINGTON, May 29 (Reuters) - Australian sharesedged down on Thursday, with losses in miners hobbling earlytrade as investors were cautious after iron ore prices fell to a20-month low and Wall Street retreated from record highs.
The Sydney market has been largely held to a tight range inrecent weeks, reflecting an uneven global economic recovery asstrong U.S. data is offset by worries about slowing growth inChina -- Australia's biggest export market -- and deflationfears in the eurozone.
"All data is showing China's slowdown is very obvious atthe moment and the whole market is worried," said Biyi Cheng,head of Asia-Pacific dealing at City Index in Sydney.
"The mining sector is under pressure - if China demand isgoing down, that will effect profits significantly this year."
The benchmark iron ore spot price fell and held near a20-month low below $100 a tonne for the past seven trading days.
Blue-chip miners BHP Billiton Ltd and Rio Tinto Ltd (Xetra: 855018 - news) dropped 1.2 percent and 1.8 percent respectively. Worldno.4 iron ore miner Fortescue Metals Group Ltd lost 2.1percent, while steelmaker Arrium Ltd fell 1 percent.
The S&P/ASX 200 index eased 5.4 points, or 0.1percent, to 5,522.4 by 0231 GMT after touching a session low of5,503.6. The benchmark added 0.3 percent on Wednesday.
On Wall Street, the S&P 500 snapped a four-session losingstreak on Wednesday to end just shy of a third straight recordclosing high.
The Australian benchmark touched a near 6-year high of5,554.5 on April 29, and has traded mostly sideways for May asthe slump in iron ore prices hit resource stocks, though overallmarket losses have been contained by demand for high yielding bank stocks.
Some traders said data showing a weaker-than-expected dropin Australian private new capital expenditure probably gave somesupport to the market on expectations it will continue to keepthe central bank focused on supporting the economy, with ratehikes some way off.
Toll Holdings Ltd soared 4.6 percent to 3-monthhighs of A$5.51 after announcing a restructure it says is"expected to generate annual savings in the range of A$10million to A$12 million commencing in FY 2015".
Shares in Westfield Group (Other OTC: WEFIF - news) and Westfield RetailTrust were both in a trading halt. At its AGM,Westfield said approximately 98 percent of security holders arein favour of restructuring the business, adding it "believesstrongly that separating the business will create greater valuefor investors over time".
New Zealand's benchmark NZX 50 index slipped 0.1percent to 5,176.3.
Clothing retailer Postie Plus Ltd was in a tradinghalt, ahead of what is expected to be an announcement about aform of capital injection
(Reporting by Thuy Ong; Editing by Shri Navaratnam)
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