* Australia's cenbank cuts GDP outlook
* U.S. transaction ban just ahead of Sino-U.S. trade deal review
* Insurance Australia Group reports 60% drop in annual profit (Updates to close)
By Soumyajit Saha
Aug 7 (Reuters) - Australian shares closed lower on Friday after the central bank downgraded its outlook for the national economy and as a U.S. ban on transactions with China's ByteDance and Tencent 0700.HK heightened tensions between the world's leading economies.
The executive orders, which go into effect in 45 days, come after the Trump administration said this week it was stepping up efforts to purge "untrusted" Chinese apps from U.S. digital networks and called TikTok and WeChat "significant threats." ban has brought the trade tensions back to the centre of all attention ... inflaming nerves ahead of what's probably going to be a crucial week in U.S.-China relations," said Kyle Rodda, market analyst with IG Australia.
The two countries are set to review the implementation of their Phase 1 trade deal on Aug. 15. S&P/ASX 200 index .AXJO was down 0.6% at 6,004.8 by the end of trade. The index gained 1.3% for the week, but still hovered around the 6,000 point level.
Risk sentiment was further dented after the Reserve Bank of Australia said it expects annual gross domestic product to contract by 6% this year and unemployment to remain high for several years. market has not been wiling to take too much risk ahead of an important earnings season and all that really is known is that there will be a reasonably big contraction in earnings growth ... there is also some trepidation about the affect of the Victoria lockdown," Rodda said.
Among sectors, miners .AXMM fell more than 1.5%, with global miners BHP Group BHP.AX and Rio Tinto (LON:RIO) RIO.AX receding 1.3% and 2.9%, respectively.
Shares of Rio Tinto dropped after its chief executive officer said the company did not tell Aboriginal traditional owners of two ancient caves destroyed to mine iron ore about three alternative mine plans. stocks .AXHJ were also lower, with Fisher & Paykel Healthcare Corp FPH.AX and Resmed Inc RMD.AX down 3% and 3.2% respectively.
Insurance Australia Group IAG.AX fell as much as 2% after the company said its annual profit plummeted 60% and declined to provide outlook for fiscal 2021. Zealand's benchmark S&P/NZX 50 index .NZ50 fell 1% to 11,646.6 points, hurt by losses among financials and healthcare stocks.