* Graincorp scraps HY dividend
* Qantas forecasts record annual profit
* Telecom stocks buoy the index
By Shreya Mariam Job
May 9 (Reuters) - Australia's benchmark share index rose on Thursday, led by telecom stocks, but gains were capped by concerns over escalating U.S.-China trade tensions.
The S&P/ASX 200 index .AXJO rose 0.4 percent or 22 points to 6,291.10 by 0129 GMT. The benchmark fell 0.4 percent on Wednesday.
U.S. President Donald Trump said on Wednesday he would be happy to keep tariffs on Chinese imports, while Beijing announced it would retaliate if Washington hikes tariffs as planned on Friday.
Investors are on tenterhooks waiting to see if the two sides can salvage a trade deal and avoid escalation during two days of talks in Washington starting later on Thursday. seen this process break down before with NAFTA and Mexico, and that ended with a positive resolution from the U.S.. People are still seeing it as a glass half full," said Chris Weston, head of research at Pepperstone brokerage, referring to the U.S.-China trade tiff. “At the same time, you're not really prepared to put much risk on the table... in case this really does become a much bigger event.”
Telecom stock TPG Telecom TPM.AX recovered some of its losses from the previous session when shares took a hit after Australia's anti-trust regulator blocked a A$15 billion ($11 billion) merger between TPG Telecom and Vodafone (LON:VOD)'s Australian joint venture on competition grounds on Wednesday. The firms however said they remained committed to the deal.
Shares of TPG rose 2.3 percent while telecom firm Telstra TLS.AX also posted an 2.4 percent gain.
Meanwhile, material stocks .AXMM 1.1 percent lower during the session. Shares of Rio Tinto (LON:RIO) RIO.AX and BHP Group BHP.AX dropped 0.5 percent and 0.6 percent, respectively.
Energy stocks .AXEJ climbed 0.9 percent on the back of rebound in oil futures which gained 1 percent on Wednesday, boosted by a surprise drawdown in U.S. crude stockpiles. O/R
Shares of Woodside Petroleum WPL.AX and Santos STO.AX rose 1.1 percent and 1.4 percent, respectively.
Earlier in the day, agribusiness company Graincorp GNC.AX reported a loss for the first half of the year and scrapped its dividend for the period, sending its shares down as much as 6.7 percent lower to a more than five month low.
Elsewhere, shares of Qantas Airways QAN.AX rose as much as 3.6 percent after it posted a 2.3 percent rise in third-quarter revenue and forecast record annual revenue. the Tasman sea, New Zealand's benchmark S&P/NZX 50 index .NZ50 was little changed rising 0.04 percent or 3.99 points to 10,067.04.
The Reserve Bank of New Zealand (RBNZ) lowered the official cash rate to an all-time trough of 1.50 percent on Wednesday. The central bank governor on Thursday cited a slowing in global economic growth as the reason the bank cut its official cash rate. of Fisher & Paykel Healthcare Corporation FPH.NZ gained 1.5 percent, while Auckland International Airport AIA.NZ advanced 0.6 percent.