Australia shares supported by banks, construction firms

SYDNEY/WELLINGTON (Reuters) - Australian shares edged higher on Wednesday, supported by another record-close for the S&P 500 and interest in banking stocks, though overall gains were capped by a slide in gold producers after bullion prices dropped overnight.

A rise in the 'Big Four' banks underpinned the sector as investors chased their high yields. Westpac Banking Corp added 0.4 per cent, and Commonwealth Bank of Australia rose 0.2 per cent to all-time highs of A$81.85. Among mid-tier banks, Bank of Queensland edged 0.1 per cent higher.

The S&P/ASX 200 index gained 16.6 points, or 0.3 per cent, to 5,528.3 by 0206 GMT. The market finished a choppy session flat on Tuesday.

The benchmark hit a near 6-year high of 5,554.5 points on April 29, but has largely drifted sideways this month with traders blaming a lack of catalysts for the tepid performance.

"The Australian economy continues to grow at a sub-trend pace, and at the moment the market has slightly stretched valuations," said Matthew Sherwood, Head of Investment Market Research at Perpetual.

"In 2012 and 2013 we had big run ups in share prices without a lot of corporate earnings growth, so 2014 is going to be that year where we get the earnings growth but we don't get much price growth," Sherwood said.

Earlier, data released from the Australian Bureau of Statistics showed construction work done nationwide in the first quarter rose 0.3 per cent.

In the construction space, Leighton Holdings jumped 1.8 per cent, and James Hardie Industries climbed 1.5 per cent to 2-1/2 month highs of A$14.63.

Gold miners dropped after bullion fell 2 per cent overnight, hitting Australia's top gold producer Newcrest Mining, which lost 3.7 per cent, while Northern Star Resources slumped 5 per cent.

Australian property group Stockland Corp upped its offer for Australand Property Group to A$2.02 billion, a month after threatening to walk away if the target rejected its original bid. Shares in Australia's No.2 property group, Stockland, added 0.8 per cent.