* ASX set for first weekly gain in 4
* Banks lead gains but wealth manager IOOF sees worst day
* Air NZ falls on workers strike
By Devika Syamnath
Dec 7 (Reuters) - Australian shares rose on Friday, reversing a three-day losing streak as markets in the region shrugged off a weaker Wall Street finish and found support from growing views the country’s central bank may consider an interest rate cut.
Financial markets have been battered this week by news of the arrest of a Chinese technology executive in Canada, which fanned fears of a renewed flare-up of U.S-China trade tensions.
The S&P/ASX 200 index climbed 0.7 percent, or 37.8 points, to 5,695.5. The benchmark dropped 0.2 percent on Thursday but was set to gain 0.6 percent for the week in its first weekly gain in four.
While Wall Street indexes ended their session lower on Thursday, market participants say the declines were smaller than expected.
“The Australian market had priced in a far more substantial fall on Wall Street than they ultimately delivered,” said James McGlew, executive director of corporate stockbroking at Argonaut.
McGlew said another factor supporting investor confidence was commentary of a potential Australian interest rate cut next year due to softer economic data, which supports high-yield stocks like the banks.
The financial sector gained as much as 1.1 percent, with the “big four” banks adding about 1.5 percent each.
However, McGlew expects wider market optimism could be short-lived.
“We’ve got things in the green but that’s not to say we won’t see a continuation of the volatility.”
Wealth manager IOOF Holdings Ltd sank 33.5 percent, its biggest decline, after the prudential regulator sought to disqualify five top employees from their positions for failing to act in their customers interests.
Australian banks have been trampled by a powerful year-long inquiry, which exposed widespread wrongdoing and misconduct at the country’s top lenders. The inquiry finished last week but investors now await its recommendations due in February.
Also defying wider gains, an overnight slide in bulk and base metals prices weighed on materials, pushing the metals and mining index down as much as 0.8 percent.
BHP Group Ltd and its spin-off South32 Ltd dropped 0.4 percent and 0.6 percent, respectively, capping wider benchmark gains.
Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index was down slightly to 8,758.64 at 0103 GMT, hurt by utilities and industrial stocks.
Air New Zealand lost 1 percent to a more than one month low. Employees at the flag carrier are planning to go on strike just four days before Christmas, a move that could affect thousands of customers in the peak travel season.
Reporting by Devika Syamnath in Bengaluru; Editing by Sam Holmes