* Australia shares claw back losses after Malaysian plane downed in Ukraine
* Investors buy into safe-haven gold stocks, banks regain (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Naomi Tajitsu
SYDNEY/WELLINGTON, July 18 Australian shares added 0.1 percent on Friday as the banking sector clawed back from the red, though investors were cautious as news of the downing of a Malaysian passenger plane in Ukraine sparked global fears of further strife in the region.
Investors sold out of global markets overnight after a Malaysian Airline plane was brought down in eastern Ukraine on Thursday, killing all 298 people on board.
Australian Prime Minister Tony Abbott said if the jet's crash had been a deliberate act, then "it is an unspeakable crime" and the perpetrators must be swiftly brought to justice.
Banks reversed earlier losses to edge higher. Westpac Banking Corp added 0.4 percent and Australia and New Zealand Banking Group was up 0.3 percent. Australia's top bank by market capitalisation Commonwealth Bank of Australia bucked the trend, easing 0.2 percent.
The S&P/ASX 200 index added 6 points to 5,528.4 by 0224 GMT. The benchmark edged 0.1 percent higher on Thursday and is set to gain 0.7 percent for the week.
Compared to the broader region Australian shares modestly outperformed, with MSCI's broadest index of Asia-Pacific shares outside Japan down 0.4 percent.
Top 20 stocks eased with global miner BHP Billtion Ltd down 0.2 percent, while Santos Ltd losing 0.4 percent.
U.S. stocks sank overnight, with the S&P 500 posting its biggest one-day percentage drop since April 10 on news of the incident, which stoked concerns that the conflict in Ukraine might widen.
"Until people see more of how it's going to pan out, what happened overnight is a short-term reaction," said John Zhu, portfolio manager at Triple 3 Partners adding that the market is taking an opportunity to 'take a foot off the pedal'.
Other analysts said investors will factor-in the recent lack of market volatility, calculating how much risk premium to build into prices as a precaution against a possible escalation in violence in Ukraine.
The gold sector jumped as buillion prices surged 1.5 percent with investors seeking shelter in the safe-haven metal. Australia's top gold producer, Newcrest Mining Ltd, climbed 3 percent while Northern Star Resources Ltd rose 4.3 percent.
Asciano Ltd climbed 4.4 percent to a 5-month high of A$5.99 after saying it was in continuing discussion over a potential sale in its terminals and logistics business division.
New Zealand's benchmark NZX-50 index slipped 27.8 points to a three-month low of 5,084.60, tracking a slide in global share markets.
Losses were led by a 2.9 percent slide in accounting software developer Xero , while telecommunications network operator Chorus fell roughly 2 percent to a three-month low.
Chorus, which is building most of New Zealand's ultra-fast broadband network, was hit after it announced a deal to bring forward some of its funding at the likely cost of paying a dividend before December 2019. (Editing by Eric Meijer)