May 20, 2020 / 1:37 AM / 8 days ago

Australia shares drop as ties with China come under pressure

* China, Australia in spat over barley tariffs

* Doubts cast over Moderna’s vaccine trial results

* Top official says NZ central bank may expand QE

By Arpit Nayak

May 20 (Reuters) - Australian shares fell on Wednesday, weighed down by escalating tensions with its top trading partner China over a global probe into the origin of the novel coronavirus, while Wall Street’s overnight losses also dented sentiment.

The S&P/ASX 200 index lost 0.6% to 5,526.7 by 0054 GMT. It had closed at a two-month peak on Tuesday.

Australia and China engaged in a war of words after Beijing imposed heavy tariffs on Australian barley imports - a move expected to effectively halt a trade worth billions of dollars.

Australia, along with the European Union, has spearheaded the call for an inquiry into the origins of the new coronavirus, which first appeared in China.

Overnight, U.S. indexes were dragged lower by a report questioning the validity of Moderna Inc’s early trial results for a possible coronavirus vaccine.

Back home, global miners BHP Group and Rio Tinto led declines in the heavyweight mining sector which fell as much as 1.5%.

Among financials, lenders Commonwealth Bank of Australia and National Australia Bank led declines. The sub-index shed 1.3%.

Energy stocks also slid up to 2.2%, with Woodside Petroleum and Santos easing 2.3% and 2.6%, respectively.

Top gold miner Newcrest Mining was the biggest drag among gold stocks despite reporting it had sufficient water supply at its Cadia mine for at least two years.

Australian shares of medical equipment firm Resmed dropped 2.7% and were the biggest drag on a sub-index of healthcare stocks.

In New Zealand, the benchmark S&P/NZX 50 index eased 0.6% to 10,728.55.

Deputy Governor of the central bank Geoff Bascand said in an interview with Reuters the government’s bond buying programme could be expanded further if needed.

Fletcher Building, the country’s largest construction firm, recouped early losses to rise 0.3% after signalling a sharp downturn in 2021 due to the virus and laying off about 10% of its workforce. (Reporting by Arpit Nayak in Bengaluru; editing by Uttaresh.V)

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