May 30, 2019 / 7:08 AM / 4 months ago

Australian shares end in red as trade war bites risk appetite

* Commodity stocks most hit on ASX

* Lynas reverses to end down, U.S. prepares for China’s rare earths threat

* NZ’s Fonterra at all-time low as dry weather hits milk output (Updates to close)

By Devika Syamnath

May 30 (Reuters) - Australian shares closed lower on Thursday, led by commodity firms and weighed by fresh exchanges in the protracted Sino-U.S. trade war that has hit global investor appetite.

The S&P/ASX 200 index finished 0.7%, or 47.9 points, lower at 6,392.1. The benchmark has lost nearly 2% since it scaled an 11-year high last week.

“There’s no question that the lead that we are getting from the United States, and this is impacting global markets, is substantial uncertainty,” said James McGlew, Executive director of corporate stockbroking at Argonaut.

“Markets can price risk well but they cannot price uncertainty.”

In a recent escalation in the war of words over tariffs, a senior Chinese diplomat described trade provocations as “naked economic terrorism”.

And in yet another blow to sentiment, Fitch Ratings said it expects Australia’s 2019 gross domestic product growth to hit its lowest since the 2008-2009 global financial crisis, despite positive commodity prices.

Resource stocks were hit hardest on the Australian benchmark.

Shares of mining behemoths BHP Group Ltd and Rio Tinto Ltd lost 1.7% and 3.3%, respectively.

Rare earths miner Lynas Corporation shares slipped late in the session to close 0.7% in the red after three consecutive sessions of gains on expectations of increased U.S. demand after Chinese media said Beijing might shut off its supply of rare earths to the United States.

In a precautionary move, the Pentagon said U.S. Defense Department is seeking new federal funds to bolster domestic production of rare earth minerals and reduce dependence on China.

A recovery in oil prices did not translate to buying in local energy stocks such as Santos and Woodside Petroleum, which lost 1.6% and 0.8%, respectively.

The main banking sub-index finished 0.1% lower. Australian wealth manager AMP Ltd shares fell 0.5%.

AMP said it would defend itself against a new class-action lawsuit filed on behalf of pension fund account holders and claiming overcharging of fees.

New Zealand’s benchmark S&P/NZX 50 index fell 0.2% to 10,071.98.

Dairy group Fonterra, said its New Zealand milk production fell 10% in April from the year before as dry weather hit farms, sending shares to a record low close. (Reporting by Devika Syamnath in Bengaluru; Editing by Sam Holmes)

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