Lilly Vitorovich
(Australian Associated Press)

Australian shares have closed lower, hurt by falls in banking and energy stocks on concerns about heightened trade tensions between the US and China.

The benchmark S&P/ASX200 index dropped 26.8 points, or 0.43 per cent, at 6,183.4 points, while the broader All Ordinaries index fell 29.2 points, or 0.46 per cent, at 6,273.6 points.

Wall Street fell overnight in a shortened trading session ahead of the July 4 Independence Day holiday in the United States.

Trade tensions continue to weigh on the mind of investors with the first round of US tariffs on $US34 billion of Chinese imports set to take effect on Friday.

CMC Markets chief market strategist Michael McCarthy said big concerns remain centred on trade following developments over the past 24 hours.

A Chinese court temporarily banned US computer chip-maker Micron Technology from selling products in China, and the US government moved to block China Mobile from offering services in the US telecommunications market.

The tech heavy-Nasdaq index was the worst performer in Tuesday trade in the US, finishing 0.86 per cent lower.

“These were seen as escalations: markets are particularly sensitive to trade given that looming deadline for Friday for the introduction of tariffs,” Mr McCarthy said.

Locally the heavyweight financials sector lost most of the gains made in the previous session, with investment bank Macquarie Group dropping 1.7 per cent to $121.06.

CBA fell 0.5 per cent to $73.59, National Australia Bank lost 1.3 per cent to $27.38, Westpac fell 0.5 per cent to $29.25, and ANZ finished 0.07 per cent higher at $28.10.

The energy sector also lost further ground, with Caltex and Woodside Petroleum down 1.7 per cent to $32.47 and 0.5 per cent to $35.28 respectively.

Weak commodity prices hurt mining stocks, with Rio Tinto falling 0.8 per cent to $80.13 and Mineral Resources dropping 2.7 per cent to $15.15.

Bucking the broader market and gaining were the telecom sector, courtesy of a gain in Telstra, and utilities, which are seen as safe haven stocks during uncertainty.

The Australian dollar rose following the release of better-than-expected May retail spending figures just before lunch, trading at 74.12 US cents at 1700 AEST, up from 73.79 US cents on Tuesday.

ON THE ASX:

* The benchmark S&P/ASX200 closed down 26.8 points, or 0.43 per cent, at 6,183.4 points

* The broader All Ordinaries index was down 29.2 points, or 0.46 per cent, at 6,273.6 points

* The SPI200 futures contract was down 32 points, or 0.52 per cent, at 6,137 points at 1630 AEST

CURRENCY SNAPSHOT AT 1700 AEST:

One Australian dollar buys:

* 74.12 US cents, from 73.79 on Tuesday

* 81.807 Japanese yen, from 81.922 yen

* 63.46 euro cents, from 63.36 euro cents

* 56.06 British pence, from 56.12 pence

* 109.31 NZ cents, from 109.89 cents

GOLD:

The spot price of gold in Sydney at 1700 AEST was $US1,260.51 per fine ounce, from $US1,242.50 per fine ounce on Tuesday