Australia shares at 19-mth high, set for best year since 2009

Australian shares gained 0.6 percent in light trade on Friday, driven by strength in commodities on surging iron ore prices, and were set to post their strongest annual gain since 2009. The benchmark S&P/ASX 200 index rose 26.8 points to 4,674.8 at 0004 GMT, its highest level since June 2, 2011.

The benchmark is on track to post gains of 15.2 percent for the year, its biggest rise since a 31 percent recovery in 2009 after the 2008 slump.

Analysts said the near-term direction for equities hinged on the U.S. budget talks which are due to resume on Sunday, amid hopes the two sides could avert the 'fiscal cliff' that risks tipping the U.S. economy back into recession. "That is going to be an influential factor for how we are going to start 2013," said Bruce McLeary, analyst at Burrell & Co in Brisbane.

"If an agreement doesn't go through there could be some weakness," McLeary said.

Local miners were supported by robust gains in spot iron ore prices, which have climbed to eight-month highs at $139.40 <.IO62-CNI=SI>.

Rio Tinto rose 1.5 percent and Fortescue Metals rose 1.1 percent.

Smaller miners also benefited, with Aquila up 1.4 percent, Atlas Iron up 3.6 percent and Iluka gaining 4.2 percent.

New Zealand's benchmark NZX 50 index slipped 1 point to 4,064.

STOCKS ON THE MOVE

* Retailers were mixed after sharp gains on Thursday as an industry association said spending by Australian shoppers rose a modest 2.9 percent over the crucial Christmas period Department store Myer Holdings was unchanged at A$2.13, while electronics chain JB Hi-Fi gained 1.7 percent.

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