Australia and NZ shares extend fall, sentiment fragile

SYDNEY/WELLINGTON, Feb 10 (Reuters) - Australian shares turned sharply lower on Wednesday after an early attempt to stabilise fizzled out with investors on edge a day after the market suffered its biggest fall in over four months.

Australia's S&P/ASX 200 index fell as much as 2.6 percent at the mid-session to 4,706.7 - a low unseen since July 2013. It was down 1.46 percent, or 70.48 points, at 4,761.60 by 0256 GMT, extending Tuesday's 2.88 percent drop.

Sentiment across the Tasman Sea also soured in late trade with New Zealand's benchmark S&P/NZX (Other OTC: NZSTY - news) 50 index erasing early gains to be down 0.94 percent, or 57.05 points, at 6,014.27. On Tuesday, the benchmark fell 1.3 percent.

A late recovery in U.S (Other OTC: UBGXF - news) . stocks had held out the hope of some stability in Asia, but an absence of investor confidence saw regional markets delve deeper into the red.

Persistent fears about slowing global growth and the Chinese economy, the health of Europe's banking sector and concerns that Beijing and major central banks might not be able to turn things around have combined to rattle investors.

"What's the scary part about this is we can see things get pretty ugly, pretty quickly," said Evan Lucas, market strategist at IG in Melbourne, adding Australia's S&P/ASX 200 index could in time fall as far as 4,620-4,650.

Weighing heavily on the index were the major miners. BHP Billiton fell 2.5 percent, while Rio Tinto (Other OTC: RTPPF - news) shed 1.0 percent. Newcrest Mining (Other OTC: NCMGF - news) lost 3.9 percent.

Australia's big lenders were also sharply lower except for Commonwealth Bank of Australia (Other OTC: CBAUF - news) , which rose 2.2 percent after posting a result that some analysts said was surprisingly good.

Australia and New Zealand Banking Group shed 2.2 percent, while Westpac Banking Group and National Australia Bank were down over 1.0 percent.

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In New Zealand, The Warehouse Group rose 0.8 percent after data showed electronic retail spending had increased in January.

Leading the losers, dairy products provider a2 Milk Company fell 4.4 percent and communications service provider Spark New Zealand (Other OTC: NZTCF - news) lost 4.3 percent. (Reporting by Ian Chua in SYDNEY and Charlotte Greenfield in WELLINGTON; Editing by Simon Cameron-Moore)