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Australia, New Zealand: Shares slip on growing worries over trade war escalation

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[BENGALURU] Australian shares slipped on Tuesday after a US crackdown on Chinese telecom giant Huawei sent global equities tumbling, as investors worried that it could lead to an escalation in the Sino-US trade war.

Australia is vulnerable to the tensions between the world's two largest economies as it is a strong US ally, and China is the biggest market for its exports, though those are largely minerals and commodities.

"There are concerns that this escalation will build into supply chains around the globe, in particular from China," said Michael McCarthy chief market strategist at CMC Markets.

The S&P/ASX 200 index fell 16.6 points or 0.3 per cent to 6,459.50 by 0102 GMT. The benchmark rose 1.7 per cent on Monday.

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The United States added Huawei to a trade blacklist last week, and on Sunday Reuters, citing a source familiar with the matter, reported that US tech major Alphabet Inc's Google had suspended certain businesses with the Chinese firm.

Shrugging off record high iron ore prices, miners fell as much as 1.2 per cent as rising trade tensions stoked worries over future demand for commodities.

Mining behemoths BHP Group and Rio Tinto fell as much as 1.2 per cent and 2.2 per cent, respectively. The smaller Fortescue Metals Group fell as much as 3.7 per cent.

Rising oil prices failed to offset the mood of uncertainty, with energy stocks slipping 1.3 per cent. Beach Energy shed 3.4 per cent while sector heavyweight Woodside Petroleum lost 1.5 per cent.

Technology stocks took a battering, falling as much as 3.2 per cent after US peers plunged overnight. Afterpay Touch Group lost 4 per cent while Altium fell 1.2 per cent.

Bucking the trend, gold stocks rose nearly 1 per cent, as the safe-haven gold prices got a bump from rattled stock markets. Northern Star Resources and Evolution Mining both rose over 1 per cent each.

Financial stocks rose after the Australian Prudential Regulation Authority (APRA) proposed dropping requirements for banks to use a minimum 7 per cent interest rate when assessing a borrower's ability to service a loan, which it said would increase customers' maximum borrowing capacity.

"This represents a material easing in the credit constraint facing households. It is possible that APRA's policy change is seen as lessening the need for near-term interest rates," ANZ said in a note.

"An alternative take is that the change will enhance the power of a rate cut and so make one more likely," it added.

Top lender Commonwealth bank of Australia rose 0.6 per cent while Westpac Banking Corp gained 1.8 per cent.

Focus will turn towards Reserve Bank of Australia Governor Philip Lowe's speech due later in the day, with investors looking for clues on the timing of an expected interest rate cut.

New Zealand's benchmark S&P/NZX 50 index fell 12.24 points or 0.1 per cent to 10,221.91.

Synlait Milk shed 1.4 per cent while dairy giant a2 Milk Company lost 0.6 per cent.

REUTERS