http://nz.biz.yahoo.com//090602/16/cn6m.html

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By Denny Thomas

SYDNEY, June 2 (Reuters) - Australian stocks rose 1.6 percent on Tuesday to their highest close in almost seven months, as economic data raised hopes the nation could dodge a recession, sending shares in retailers and builders higher.

Trade data suggested Australia just might have missed recession last quarter, while the central bank kept interest rates unchanged amid signs of economic stabilisation.

"A recovery is well underway and the market is following positive economic news," said Brian Eley, fund manager with Eley Griffiths Group, which oversees about A$500 million ($406 million).

"In the initial phase, materials, energy and cyclical stocks will show the strongest moves," he added.

The benchmark S&P/ASX 200 index .AXJO added 60.9 points to 3,955.3, based on the latest available data, its highest close since Nov. 11, and adding to a 2 percent rise on Monday.

The index is now up about 26 percent from a five-year closing low reached in early March.

New Zealand's benchmark NZX 50 index .NZ50 rose 1.6 percent to 2,807.2.

In a widely expected move, the Reserve Bank of Australia left interest rates unchanged at 3.0 percent at its monthly board meeting but said there was room to go down further if needed.

"It's a further confirmation of their easing bias, though they pointedly note that it will only be done 'if needed'," Rory Robertson, interest rate strategist at Macquarie Group.

"The story that's been emerging in the last few weeks is that low rates are promoting growth. Home construction and home prices are turning higher, showing that policy is working," he added.

For a wrapup of Tuesday's Australian economic news see [ID:nSYD16754].

All eyes are now on first-quarter GDP data on Wednesday.

RETAILERS GAIN

Retail stocks jumped, with electricals chain JB Hi Fi Ltd (ASX: JBH.ax) up 5.4 percent at A$13.28 and furniture and appliances retailer Harvey Norman Holdings Ltd (ASX: HVN.ax) rising 4 percent to A$3.11.

Boral Ltd (ASX: BLD.ax) , Australia's top building products maker, gained 4.5 percent to A$4.43 and cement maker Adelaide Brighton (ASX: ABC.ax) rose 2.6 percent to A$2.37 after approvals to build new homes in Australia rose 5.1 percent in April, outpacing analysts' forecasts. [ID:nSYD257579].

Miners and other companies relying on global demand were spurred after better-than-expected manufacturing data in the United States added to hopes the global slump may be moderating.

Rio Tinto Ltd (ASX: RIO.ax) firmed 4 percent to A$69.00 and bigger rival BHP Billiton Ltd (ASX: BHP.ax) added 2.7 percent to A$36.70.

Macquarie Group Ltd MQG.AX, Australia's top investment bank, rose 2.6 percent to A$36.30, adding to Monday's 11.8 percent rise. Investors are betting that a recovery in global equity and debt markets would revive mergers and acquisitions and initial public offerings, key revenue earners for Macquarie.

Earlier, Macquarie said it was not aware of any reason for Monday's big jump. [ID:nSYU006618].

But Amcor Ltd (ASX: AMC.ax) , an Australian packaging group, fell 3.5 percent to A$5.00. Credit Suisse cut its rating on Amcor to underperform from neutral saying the recent rise in Australian dollar AUD= against the U.S. dollar will negatively impact Amcor's earnings.

PaperlinX Ltd (ASX: PPX.ax) , Australia's top paper merchant, dropped 7.4 percent to A$0.50 after forecasting a 30-35 percent fall in its full-year earnings forecast. [ID:nSYU006617] ($1=A$1.25) (Editing by Jonathan Standing)