August 31, 2018 / 6:58 AM / 3 months ago

Australian shares fall on fear U.S.-China trade fight to worsen; NZ down

* Telecom stocks falter, sheds Thursday’s advance

* Weaker commodity prices hurt material stocks

* Australian, NZ shares down for day, but gain for the week (Updates to close)

By Nikhil Nainan

Aug 31 (Reuters) - Australian shares fell on Friday, as investors feared an escalation in U.S.-China trade frictions and sold telecom shares that advanced a day earlier on a merger deal announced by TPG and Vodafone’s Australian unit.

The S&P/ASX 200 index closed 0.5 percent lower at 6,319.5, but added 1.2 percent for the week.

Telecom stocks suffered the heaviest losses, a day after rising as TPG Telecom and Hutchison Telecommunications (Australia), Vodafone Group’s Australian unit, agreed to merge into a larger third player in the sector.

TPG dropped more than 7 percent while Hutchison plunged more than 25 percent.

Telstra , which gained on Thursday, shed 4 percent. It faces a review into its copper network by the Australian Competition and Consumer Commission.

Bloomberg reported that U.S. President Donald Trump is ready to impose tariffs on $200 billion more in Chinese imports as soon as a public comment period on the plan ends next week.

Official data that showed China’s manufacturing sector unexpectedly picked up in August, after a two-month slide, did little to boost confidence, even in the resource space, as trade tensions were on investors’ minds.

China is Australian largest trading partner.

Trump’s latest salvo saw commodity prices slip, undermining material stocks, resulting in the sector index falling 1.7 percent.

“It is going to continue to potentially trouble the base metal complex. Saying that, we have a natural Aussie dollar hedge which helps out but uncertainty is no friend to the market,” Damian Rooney, director of equity sales at Argonaut.

“I think the tariff issue is not going away in the short term.”

Global miners BHP and Rio Tinto fell 1.7 percent and 0.6 percent, respectively.

The only sector eking out some gains was health care. The weaker Aussie dollar helped prop up shares in a sector reliant on exports and overseas operations.

Primary Health Care and Ramsay Health Care topped the gains, up 3 percent and 2.2 percent.

New Zealand’s benchmark S&P/NZX 50 index fell 0.3 percent, or 26.68 points to 9,313.2, but closed the week 1.7 percent higher. It was the market’s fourth straight weekly gain.

Shares of the world’s biggest dairy exporter Fonterra Co-operative Group declined 0.2 percent. It cut its farmgate milk price for 2018-2019 by 3.6 percent.

a2 Milk Company and Synlait Milk fell 0.6 percent and 2.3 percent, respectively. (Reporting by Nikhil Kurian Nainan in Bengaluru; Editing by Richard Borsuk)

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