* Lowest intraday level since December 2014
* Fears of stumble for U.S. economy take hold
* China posts slump in factory activity (Adds analysis, quotes, stocks on the move)
SYDNEY/WELLINGTON, Aug 21 (Reuters) - Australian shares fell to an eight-month low on Friday as concerns the U.S. Federal Reserve may resume buying bonds weighed on bank stocks, while a weak industry survey from China added to concerns about Australia's biggest trading partner.
Wall Street stocks fell overnight, pushing down treasury yields and reigniting fears that the Fed may abandon plans to raise interest rates and resort instead to new quantitative easing stimulus measures.
The Caixin PM survey showed China's biggest fall in factory activity in 6 1/2 years, adding to the worries created by the calamitous share market crash of recent weeks and last week's currency devaluation. ID:nL3N10S379
Australia's S&P/ASX 200 index .AXJO dropped 83.9 points or 1.6 percent to 5204.7 by 0231 GMT, its lowest intraday level since December 18. The index has fallen 8 percent so far this month.
"The American economy was meant to be a strength at the moment and now we're getting rumours of QE4," said Quay Equities head of trading Tristan Knell, referring to quantitative easing.
"Combine that with China and that just continues the negativity."
The "Big Four" banks led the declines, with Westpac Banking Corp WBC.AX , National Australia Bank NAB.AX and Australia and New Zealand Banking Group ANZ.AX each down 3 percent while Commonwealth Bank of Australia CBA.AX fell 2 percent.
Insurance Australia Group IAG.AX shed 4 percent after reporting that a blowout in disaster-related claims dragged down its profit by more than a third.
Iron ore major BHP Billiton (LONDON:BLT) BHP.AX lost 1 percent and rival Rio Tinto (LONDON:RIO) RIO.AX was flat while smaller Fortescue Metals Group dropped 3 percent. The iron ore sector relies heavily on demand from China.
Energy stocks outperformed the broader market as traders sought bargains after heavy losses a day earlier as the oil price held near multi-year lows. Woodside Petroleum WPL.AX was down 1 percent and Oil Search OSH.AX was down 2 percent.
Oil producer Santos STO.AX rose 2 percent after saying its Chief Executive Officer was stepping down as it posted an 82 percent slump in full-year profit.
Health insurer Medibank Private MPL.AX leapt 11 percent, the biggest gainer on the market, after beating analyst forecasts with its first annual profit since listing in November.
New Zealand stocks were marginally higher as a sharp rise for telecommunications stock Spark SPK.NZ offset weakness in other leading stocks, leaving the benchmark NZX50 share index .NZ50 up just a point at 5,743.22.
Spark surged more than 8 percent as it reported a lift in operating earnings and said it planned a special dividend next year. ID:nWNBS018R7
Most other leading stocks were lower. Pay TV operator Sky TV SKT.NZ tumbled 4.3 percent as it reported its subscriber base shrank ID:nWNBS018R8 , F&P Healthcare FPH.NZ fell 3.1 percent and Fletcher Building FBU.NZ and casino operator Sky City SKC.NZ also fell.
For more individual stocks activity click on STXBZ