(Adds analysis, quotes, stocks on the move)
SYDNEY, Jan 15 (Reuters) - Australian shares rose 0.7percent on Wednesday, recovering from the previous session'srout as investor sentiment took heart from gains on Wall Streetovernight, which rose on better-than-expected retail figures.
The gain in U.S. stocks erased much of the previoussession's steep drop, after an unexpectedly strong Decemberretail sales reading eased concerns about an economic slowdown.
The financial sector underpinned the market with the BigFour banks among the sector's biggest gainers. Top (Taiwan OTC: 8419.TWO - news) lender Commonwealth Bank of Australia (Other OTC: CBAUF - news) rose 0.8 percent whileAustralia and New Zealand Banking Group added 0.9percent. Mid-tier Bendigo Bank and Adelaide Bank rose0.6 percent.
The S&P/ASX 200 index rose 33.1 points to 5,245.1 by0020 GMT, its biggest one-day rise in three weeks. The benchmarkfell 1.5 percent on Tuesday, its biggest single day decline in3-1/2 months.
"The Australian market has been in decline for the past twoweeks as liquidity returns to the market," said Chay Flack, anequities dealer at CMC Markets Stockbroking in a note.
"Christmas generally sees low trade volumes through themarket, which can exaggerate price movement in stock."
Heavyweight miners reversed the previous session's decline,but gains were capped as metals prices slipped overnight.Top-tier miners BHP Billiton Ltd and Rio Tinto Ltd (Xetra: 855018 - news) rose 0.2 percent and 1.4 percent each.
The gold sector declined, with Newcrest Mining Ltd and Regis Resources Ltd losing 4.4 percent and 6.9percent.
OZ Minerals Ltd, Australia's third-biggest copperproducer, soared 16 percent to A$3.56, a nine-week high aftersaying it will increase copper and gold production this calendaryear after 2013 production came in at the top end of guidance.
"Their quarterly numbers were strong even though thefull-year was down," said Juliana Roadley, market analyst atCommonwealth Securities.
"I think what you've seen with them over the last year theyhave been really turning around their business, they're notlagging on change."
Meanwhile, Fortescue Metals Group will pay off$1.64 billion on its bonds in March, up to two years ahead ofmaturity, cutting debt as fast as possible while iron ore pricesremain strong. Shares in Fortescue jumped 4.7percent.
Elsewhere, defensives rose with consumer staples retailer Wesfarmers Ltd climbing 0.9 percent while Australia'stop communications provider Telstra Corporation Ltd added 0.2 percent.
Coalspur Mines Ltd surged 19.4 percent toseven-month highs of 0.37, continuing its climb after thecompany said a regulator had closed its hearing relating to itsapplication for approval of its Vista project earlier this week.
New Zealand's benchmark NZX 50 index rose 0.4percent to 4,883.1.
(Reporting by Thuy Ong; Editing by Eric Meijer)