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

Australian shares rode iron ore stocks up to finish at a 19-month high on Friday, with a recovery in battered mining shares helping drive the market to its strongest annual gain since 2009.

The benchmark is on track to post gains of around 15 percent for the year, its biggest rise since a 31 percent recovery in 2009 from the global financial crisis.

Analysts said the near-term direction for stocks 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.

Investors are taking the view that the United States, like Europe earlier this year, will take steps to avoid a disaster or at least postpone it.

"A big issue is being made of it, but eventually they'll do something to kick the can down the road," said Steven Robinson, senior investment manager at Alleron Investment Management in Sydney.

The benchmark S&P/ASX 200 index rose 23.3 points, or 0.5 percent to close at 4,671.3, according to the latest data, its highest close since June 2, 2011.

New Zealand's benchmark NZX 50 index rose 0.4 percent to finish at 4,080.9.

Miners were supported by robust gains in spot iron ore prices, which have climbed to eight-month highs at $139.40.

"To a large extent the bounce that we're seeing in the market is into oversold cyclicals, and you're seeing it on iron ore stocks, bouncing on the back of the lift in the iron ore price," said Robinson.

Mining giant BHP Billiton rose 1.1 percent, while Rio Tinto gained 1.7 percent.

Pure play iron ore miners put on stronger gains, with Fortescue Metals and Atlas Iron up more than 2 percent and BC Iron climbing 5.8 percent.

Retailers advanced for a second day after an industry association said spending by Australian shoppers rose a modest 2.9 percent over the crucial Christmas period Department store Myer Holdings rose 0.9 percent to A$2.15, while electronics chain JB Hi-Fi gained 0.9 percent and furniture and appliances retailer Harvey Norman rose 2.1 percent.

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