New Zealand's stock market rallied on Wednesday after the nation's central bank stunned investors with a steep 50 basis point rate cut, while Australian shares snapped a five-session losing streak, powered by safe-haven gold stocks.

New Zealand's S&P/NZX 50 index finished 1.9% higher at 10,786.26. The benchmark rose sharply after the central bank jolted markets by cutting interest rates a steep 50 basis points and flagged the risk of going nuclear by taking rates below zero.

Energy retailer Mercury NZ was the top gainer and closed at a record high.

The New Zealand move underscored how worried policymakers have become over the broadening impact of trade frictions.

Global risk assets were caught in a week-long sell-off after a dramatic escalation of the Sino-U.S. trade war, but a modicum of calm was restored when U.S. President Trump played down the prospects of the trade dispute being drawn out.

Trump last week threatened further tariffs on Chinese goods, triggering the initial shakeout in markets which then went into a tailspin when Washington labelled Beijing a currency manipulator after it let the yuan slip past a key 7-per-dollar level to 11-year lows.

Signs of support for the yuan from China's central bank also helped ease investors' fears, though the currency slipped further in morning trade, keeping markets guessing.

Australia's S&P/ASX 200 index ended 0.6%, or 41.4 points higher, at 6,519.5. The index tumbled 2.4% in the previous session.

Safe-haven gold stocks rocketed to a record high close, as metal prices continued to rise on the uncertainty surrounding U.S.-China trade relations.

Gold miner Newcrest Mining rose 3.8% to hit its best level in nearly eight years, while peer St Barbara jumped 5.4% to end at a four-month high.

Australia's rare earths miners also rose against the backdrop of the trade war. China is the biggest supplier of rare-earths and it has previously hinted at limiting supply of these materials.

Rare earths miner Lynas Corporation gained 2.6%, while Northern Minerals and Alkane Resources Ltd  were 1.6% and 1.3% higher, respectively.

On the downside, and reflecting the worries over demand, major mining stocks BHP Group Ltd and Rio Tinto  closed 0.9% and 2.1% lower. China is the biggest buyer of Australian resources including iron ore and copper.

Energy stocks also remained subdued, with Woodside Petroleum closing 0.4% lower.

The banking index ended stronger but top lender Commonwealth Bank of Australia saw its worst close since early June after posting its first back-to-back annual profit decline in more than a decade, flagging further pain to margins from low interest rates and swelling costs. The stock lost 1.4%

Copyright Reuters, 2019