* Energy stocks down 1%, top losers on benchmark index
* Afterpay declines 2.2% to near two-week closing low
* Pushpay Holdings jumps the most since May 7, 2020 (Updates to close)
By Harish Sridharan
March 23 (Reuters) - Australian shares surrendered early gains to close slightly lower on Tuesday as western sanctions against China dampened risk appetite, with energy and technology stocks leading the retreat.
The S&P/ASX 200 index .AXJO settled 0.1% lower at 6,745.4, after gaining as much as 0.5% in earlier trading.
The United States, the European Union, Britain and Canada imposed sanctions on Chinese officials on Monday, seeking to hold Beijing accountable for mass detentions of Muslim Uighurs in northwestern China. hit back immediately with punitive measures against the EU that appeared broader, including European lawmakers, diplomats, institutes and families, and banning their businesses from trading with China.
"There is a bit of a worry on the Chinese sector, and that is leading to negative sentiment in Australia" said Nick Twidale, chief executive officer of APAC at FP Markets.
"We are moving into a fearful market sentiment where investors are almost hopefully long, but are much more on alert to any bad news that comes their way."
In Australia, energy stocks .AXEJ shed 1%, dragged down by a fall in oil prices as new pandemic curbs in Europe raised fuel demand recovery concerns. O/R
Woodside Petroleum WPL.AX and Santos Ltd STO.AX fell 1.1% and 2.5%, respectively.
Technology stocks .AXIJ were weighed down by a 2.2% drop in buy-now-pay-later giant Afterpay Ltd APT.AX to a two-week closing low.
Financials .AXFJ also eased with all the "Big four" banks closing in negative territory.
Healthcare stocks .AXHJ , however, climbed 0.7% as a weaker Australian dollar benefitted export-reliant healthcare companies that earn in U.S. dollars.
New Zealand's benchmark S&P/NZX 50 index .NZ50 closed 0.5% higher at 12,394.34.
Payments platform operator Pushpay Holdings PPH.NZ jumped 10.2% in its best session in 10 and a half months and was the top gainer on the bourse after investors Peter Huljich and Christopher Huljich entered deals to sell their entire stakes to global investment firm Sixth Street.