* AXJO falls on risk averse sentiment
* Tyro Payments slumps on withdrawal of bid from Potentia
* Tech, energy stocks offset some losses
May 22 (Reuters) - Australian shares declined on Monday, dragged lower by the financials and gold indexes, as risk sentiment turned sour after negotiations to reach a deal for the U.S. debt ceiling approached the eleventh hour after halting last week.
The S&P/ASX 200 index finished 0.2% lower to 7,263.3 points. The benchmark had risen 0.6% on Friday.
Negotiations to raise the U.S. debt limit were stalled on Friday as the world's largest economy moved closer to the deadline for avoiding default.
"We did get a negative lead from the U.S. over the debt ceiling negotiations and that has kind of flagged that our market is going to be pretty much flat," Mathan Somasundaram, chief executive officer at Deep Data Analytics said.
U.S. President Joe Biden and his Republican counterpart Kevin McCarthy will meet later in the global day to resume talks, with a June 1 deadline looming in less than two weeks to arrive at a conclusion.
Investors fear that a failure to raise the debt ceiling will trigger an economic recession in the U.S., which could send interest rates spiralling higher.
Back in Australia, the bank index led the laggards in the benchmark index, losing about 0.6%, with the country's largest banks falling between 0.7% and 0.9%.
The gold index followed suit, slipping 0.5%, with sector majors Newcrest Mining and Northern Star Resources trading 0.2% and 1.1% lower.
In corporate news, payments terminal firm Tyro Payments slumped nearly 20% after private equity firm Potential Capital ended its discussions to buy the company.
On the bright side, domestic technology stocks countered some losses, rising about 1.5%, with accounting software provider Xero Ltd gaining about 1.1%.
Additionally, energy and healthcare firmed about 1% and 0.5% respectively.
New Zealand's benchmark S&P/NZX 50 index fell about 0.9% to finish the session at 11,993 points. ($1 = 1.4743 Australian dollars) (Reporting by Archishma Iyer in Bengaluru; Editing by Janane Venkatraman)