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By Sneha Kumar

Aug 1 (Reuters) - Australian shares closed nearly 1% lower on Friday, with index heavyweight financials leading the decline as investors exited overpriced banks ahead of their earnings.

Investors also focused on developments on the tariffs front as the United States slapped dozens of trading partners with steep tariffs, though levies on Australian exports remain at 10%.

The S&P/ASX 200 benchmark index .AXJO fell 0.9%, or 80.8 points, to 8,662. The benchmark, which rose 2.3% in July, ended the week flat.

The financials sub-index .AXFJ fell 1.1% in its biggest single-day drop in more than a week. Three of the "big four" banks declined between 1% and 2%.

Despite that, the sub-index gained 2.6% for the week as a softer inflation report earlier this week raised bets of an interest rate cut in August. Banks are likely to benefit from low interest rates leading to higher lending volumes.

A staggering rally in bank shares over the past 18 months has been a cause of concern for investors given the limited earnings growth to support elevated valuations.

Australian banks, led by top lender CBA CBA.AX, will issue their earnings reports for the June quarter later this month.

Meanwhile, miners .AXMM ended flat after rising as much as 0.7% intraday. Fortescue FMG.AX closed 1.2% higher, Rio Tinto RIO.AX fell 0.7%, BHP BHP.AX ended flat.

"With the recent recovery in iron ore prices, there appears to be some switching out of the banks into the miners," said Philip Pepe, senior analyst at Shaw and Partners.

Tony Sycamore, a market analyst at IG, said even with expected interest rate cuts, the rotation "could probably continue for another two to three months into the year-end".

Elsewhere on the bourse, gold .AXGD and tech stocks .AXIJ retreated 1.3% and 2.4%, respectively. Tech stocks declined by the most in nearly four months.

In New Zealand, the benchmark S&P/NZX 50 index .NZ50 fell 0.7% to 12,729.40, after the United States imposed a higher tariff of 15% on goods from the country.

(Reporting by Sneha Kumar in Bengaluru; Editing by Subhranshu Sahu)

((sneha.kumar@thomsonreuters.com))

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