* Drop in blue chips sends market lower
* Most sectors trading lower for third consecutive session
* Australian consumer sentiment improves modestly, retailstocks mixed (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Gyles Beckford
SYDNEY/WELLINGTON, July 9 (Reuters) - Australian shares fell0.9 percent on Wednesday to lose further ground from this week'sone-month high, with big-name stocks stumbling lower after asell-off on Wall Street overnight.
Among blue-chip banking stocks, Australia and New ZealandBanking Group dropped 1.2 percent, while WestpacBanking Corp, Australia's second biggest bank by marketvalue, dipped 0.8 percent. Elsewhere top-tier miner BHP Billiton (NYSE: BBL - news) Ltd lost 0.9 percent.
Among the top 20 stocks on the ASX 200, Australia's biggesttelecommunications provider, Telstra Corporation Ltd,fell 0.5 percent.
U.S. stocks fell in a broad sell-off overnight, dropping forthe second straight session and driving the Dow below 17,000 asinvestors turned cautious before the start of earnings season.
The S&P/ASX 200 index had tumbled 51.8 points to5,459.1 by 0208 GMT, heading for its third consecutive losingsession.
The benchmark hit a near-six-year peak of 5,554.5 on April29, but has mostly shuffled sideways since then as investorsturned cautious over geopolitical tensions in Iraq and Ukraine.
"I think the market is going to take stock while we wait forearnings season to come through, so not much will be happeninguntil the results do come out," said Douglas Loh, head ofequities at Acorn Capital.
A measure of Australian consumer sentiment improved modestlyin July as worries about family finances eased, a survey showedon Wednesday, though the depressing impact of an unpopularfederal budget continued to linger.
Closely tied to consumer sentiment, retailers were mixed. Department store operator Myer Holdings Ltd was flat,while discount retailer The Reject Shop Ltd added 0.4percent.
Navitas Ltd, a provider of pre-universityprogrammes, tumbled 32.5 percent to A$4.77, its lowest sinceFebruary 2013, after revealing it would be losing a long-termcontract with Macquarie University.
Yellow Brick Road Holdings Ltd gained 3.4 percentto a six-year high of A$0.78 after acquiring Resi MortgageCorporation for A$36 million. The company also said it hadsecured firm commitments to raise A$42 million via privateplacements.
New Zealand shares followed the overseas lead with thebenchmark NZX-50 index down 28.9 points or 0.6 percentat 5,137.12, a one-week low.
The index of the top 10 companies fell 1.2 percent.
In contrast, mid-cap stocks traded with a firmer tone,notably jewellery retailer Michael Hill Ltd, which was3.1 percent higher at NZ$1.34 after a positive sales reportearlier in the week. (Reporting by Thuy Ong; Editing by Alan Raybould)
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