June 26 (Reuters) - Australian shares hit an about three-month low on Monday, dragged by the losses in banking and mining stocks, as cautious investors awaited crucial local economic indicators, including inflation data, this week.

The S&P/ASX 200 index dropped 0.4% to 7,073.1 by 0043 GMT, its lowest level since March 30. The benchmark closed down 1.3% on Friday.

Federal Reserve Chair Jerome Powell in a testimony to U.S. lawmakers last week, suggested that the central bank had not reached the end of its tightening cycle, while he provided reassurance that the Federal Reserve would proceed with caution.

Back in Sydney, miners lost around 1%, with iron ore giant BHP Group leading losses. Shares of Rio Tinto and Fortescue Metals fell 1.3% and 0.9%, respectively.

Financials slipped 0.3%, with all of the 'Big Four' banks trading in the red. Commonwealth Bank of Australia dropped 0.7%.

Technology stocks were flat, with Xero and Megaport falling 0.1% and 3.4%, respectively.

Healthcare stocks lost 0.4%, tracking the broader sombre mood.

Gold stocks, however, capped losses on the benchmark, rising 1.1% on bullion's strength. Sub-index heavyweights Newcrest Mining and Northern Star Resources gained 1.2%, each.

Metcash jumped 5.3% after the grocery distributor lifted its full-year dividend.

Perenti slumped 10.4% after the diversified miner said it would buy out smaller rival DDH1 in a deal worth A$410 million ($273.84 million). DDH1 shares jumped 7%.

Retail giant Wesfarmers' Australian Pharmaceutical Industries unit will buy aesthetics firm SILK Laser Australia for about A$180 million, the companies said. SILK advanced as much as 17.4% at A$3.31.

Element 25 gained 20% after the battery metals producer inked a manganese sulphate supply deal with General Motors

Across the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index fell 0.4% to 11,694.9.

($1 = 1.4972 Australian dollars) (Reporting by Rishav Chatterjee in Bengaluru; Editing by Rashmi Aich)