SYDNEY: Australian stocks retreated from early highs to stand 0.7 percent up on Wednesday, as banks gave ground and helped drag the market back from initial gains of as much as 2 percent.
Stronger-than-expected retail sales figures were not enough to prevent the market slipping.
"Our market is a long way from the initial open. People are much more concerned about the macro environment and what that might mean for future retail spending and as a consequence that one figure hasn't really moved markets today," said Angus Gluskie, portfolio manager at White Funds Management.
He said investors were more interested in seeing signs of progress in Europe's handling of its debt crisis.
The benchmark S&P/ASX 200 index rose 27 points to 3,899.4 by 0036 GMT. It lost 0.6 percent on Tuesday.
New Zealand's benchmark NZX 50 index rose 0.1 percent to 3,324.5.
Australian banks had rallied as much as 3 percent in early trade after a sharp last-minute turnaround on Wall Street. US stocks had been buoyed by an agreement by European finance ministers to safeguard their banks.
Top miners, which rely on offshore demand for their exports, and Australian banks, which are exposed to offshore funding costs, all staged significant rebounds from this week's lows.
"That move in the US was a bit of a knee-jerk reaction. The actual news flow is not enough to warrant a real change in market direction," said Gluskie.
STOCKS ON THE MOVE:
* Retailers were mixed after retail sales rose a surprisingly high 0.6 percent in August, a second straight month of strong results that suggested consumers were proving resilient to turmoil on global financial markets.
Myer was up 1.5 percent at A$2.05 while JB Hi-Fi fell 0.7 percent and Woolworths fell 1.1 percent.
Transfield Services rallied 5.3 percent to A$1.905 after it announced a share buy-back and said its fiscal 2012 earnings guidance was unchanged.
BHP Billiton , which had its lowest close in over 26 months on Tuesday, rallied 3.3 percent to A$34.99 while Rio Tinto , which had hit a 2-year low this week, rose 2.1 percent to A$60.25.
LME copper jumped 2 percent in early trade on Wednesday, putting it on track to snap five straight days of losses. Three-month copper on the London Metal Exchange climbed $134.75 to $6,934.75 a tonne at 0030 GMT.
Coal miner New Hope Corp jumped 16 percent to A$6.11 after it revealed a number of preliminary takeover proposals and set out a formal process to look at selling the company. The miner would not name the interested parties but local media speculation has pointed to Anglo-Swiss miner Xstrata Plc as a potential bidder.
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