* Aussie benchmark ends three weeks of losses
* NZ index gains for the third session on the week (Updates to close)
By Susan Mathew
April 6 (Reuters) - Australian shares ended effectively flat on Friday with investors holding positions as they now await China's response to U.S. President Donald Trump's newly proposed tariff plan. Trump instructed trade officials on Thursday to consider a $100 billion of tariffs on Chinese goods after China said it would subject $50 billion of U.S. goods to increased tariffs.
The escalation followed Trump's initial proposal for a 25 percent tariff on many imports from China. MKTS/GLOB
"So far it is still just a war of words, with investors assuming the final outcome will fall far short of the threats, though nervousness has risen," RBC Capital Markets said in a note.
"We still expect China to soften its tone behind the scenes, as it has more to lose in a full-blown trade war, but it would be prudent to stick to risk-neutral trades as trade war headlines shake out."
The S&P/ASX 200 index .AXJO closed 10 basis points lower at 5,788.7, and logged a weekly gain of 0.5 percent, ending a three-week run of losses.
Gains in materials stocks countered losses in financials as miner BHP BHP.AX closed 0.5 percent higher, cancelling Commonwealth Bank of Australia's CBA.AX 0.4 percent loss. O/R
Woodside Petroleum WPL.AX added 1.1 percent and closed at it highest in nearly two months, while mall operator Westfield Corp WFD.AX finished the session up 1.6 pct.
Healthcare stock CSL Ltd CSL.AX was the biggest drag, down 0.8 percent.
New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.4 percent, or 29.28 points, to finish the session at 8,393.27. The index added 0.9 percent on the week, gaining in three of this four sessions. The market was closed on Monday for an Easter holiday.
Materials and consumer discretionary stocks led gains with Fletcher Building FBU.NZ closing 1.6 percent higher and Sky Network Television SKT.NZ ending up 6.3 percent.