* Benchmark's best week since April 15, 2016
* Aussie banks banning div could impact broader economy-Jefferies
* NZ closes higher (Updates to close)
By Nikhil Subba
April 3 (Reuters) - Australian shares ended weaker on Friday, as financial stocks led the benchmark to erase early gains, while investors continued to abandon their bets over forebodings about a deep pandemic-driven global recession.
The S&P/ASX 200 index .AXJO ended 1.7% down at 5,067.50, after climbing as much as 1.8% earlier in the day. However, on a weekly basis, the benchmark settled 4.4% higher, its best week since April 15, 2016.
"The market is probably partly fading ahead of the weekend which brings with it quite a bit of uncertainty (COVID-19's growth rate, any government action etc)," said Steven Daghlian, market analyst at CommSec.
"Also, while markets aren't as volatile as they were just a week ago (for now), we can still expect these types of swings due to plenty of uncertainty that we're still faced with."
New South Wales, the epicentre of the coronavirus outbreak in Australia, warned that health authorities were grappling with an increased number of cases without a known source, which could make dealing with the spread difficult. stocks .AXFJ were worst performers, falling 2.1% at close, with all the "Big Four" banks ending in the negative territory. The heavyweight sector, however, rose 4.2% on a weekly basis, its best week since May 24, 2019.
Analysts say the "Big Four" may cut dividends in coming weeks to save their capital buffers against the fallout from the coronavirus pandemic, tracking similar moves in Europe and New Zealand. Jefferies said in a note that any ban on Australian banks paying out dividends would be bad, not just for them, but for the broader economy. healthcare sub-index .AXHJ finished 1.7% lower, dragged lower by sector heavyweights CSL's CSL.AX 1.4% fall and 4.2% drop by Cochlear COH.AX .
Energy stocks .AXEJ closed 0.3% higher, coming down from a 10% leap early in the session, as oil prices fell.
Santos STO.AX closed 0.5% up, after seeing highs of as much as near 16% earlier in the day, while Oil Search OSH.AX finished 4.6% firmer.
Bucking the overall sombre trend, miners .AXMM closed 1.3% higher, as iron ore prices jumped after the Brazilian government ordered to halt operations at 47 mining dams due to their stability issues.
BHP Group BHP.AX ended the session 1.6% higher, while peer Rio Tinto (LON:RIO) RIO.AX climbed 1.8% at close.
New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.7% to finish the session at 9,935.18.
Tourism Holdings THL.NZ advanced 7.5% at close, while Restaurant Brands New Zealand RBD.NZ gained 6.1%.