[BENGALURU] Australian shares fell as sentiment soured in the materials sector on Thursday, following Rio Tinto's first-half earnings miss and an escalation in the trade war between the United States and China.

The S&P/ASX 200 index fell 0.2 per cent to 6,261.5 by 0200 GMT. The benchmark inched lower on Wednesday.

Rio Tinto lost more than 3 per cent, posting its biggest intraday decline in four months, to hit its lowest in over two weeks, after the global miner reported first-half underlying earnings that fell short of market expectations.

Concerns about rising inflation and reliance on iron ore for the bulk of its profits further dented confidence.

Rio's London-listed shares dropped by about the same after the news on Wednesday, despite the company earmarking an additional US$1 billion to buy back London-listed stock.

Investors had been upbeat about a strong showing by Rio ahead of the miner's results and the start of the reporting season down under, which had sent its shares higher.

Christopher Conway, head of research and trading at Australian Stock Report, said Rio's earnings and worries about the escalating trade war and tariffs have impacted commodities.

"It's a broad sector obviously but the Rio results is having a negative impact. So as it is turning out, today is quite a bad day for our materials players," Mr Conway said.

Copper, iron ore, base metals and other materials, all slid on Wednesday tracking a potential hit to demand on account on trade war worries, with the metals and mining sub-index down 1.7 per cent.

A day ago, the US administration threatened tariffs of 25 per cent instead of 10 per cent on US$200 billion worth of imported Chinese goods. China called the move "blackmail" and warned it would respond in kind.

BHP led the losses with a 2 per cent fall.

On the other hand, financial stocks, which make a hefty contribution to the S&P/ASX 200, helped cap the broader declines, with the sector index up 10.3 points.

Westpac Banking was the biggest lift, rising 0.6 per cent, followed by Commonwealth Bank of Australia and Suncorp Group, up 0.2 per cent and 0.9 per cent, respectively.

New Zealand's benchmark S&P/NZX 50 index dropped 0.2 per cent, 19.03 points, to 8,840.89.

Index heavyweights Fletcher Building and telecommunications firm Spark New Zealand were the biggest drags, down 0.9 per cent and 0.7 per cent, with a2 Milk Company all but set to extend its poor run for a fourth straight session.

AFP