Australia shares claw higher on 'Big Four' banks, retail sales disappoint

* ASX 200 rise as banks claw back from red

* Disappointing retail sales data hits stocks in the sector

* 102 shares higher, 88 shares lower, 9 shares unchanged (Adds analysis, quotes, stocks on the move)

By Thuy Ong

SYDNEY/WELLINGTON, Oct 1 (Reuters) - Australian shares added 0.2 percent on Wednesday as a claw back among banking stocks helped buoy the market, though sentiment was dampened as Wall Street fell overnight and retail sales data came in weaker than expected.

The Australian Bureau of Statistics said retail sales in August edged 0.1 percent higher, below a forecasted rise of 0.4 percent.

Stocks in the sector were hit on the news, with department store operator Myer Holdings Ltd dropping 1.4 percent to a November 2012 low of A$1.93, while clothing company Pacfic Brands Ltd lost 2.1 percent.

"We are seeing those retailers coming under a bit of pressure today as a result of that retail sales number coming through weaker than expected," said Leanne Jones, equities analyst at Bell Direct.

The financials sector was mixed with the major banks higher in choppy trade, but insurance stocks slipped. National Australia Bank added 0.1 percent and Australia and New Zealand Banking Corp rose 0.6, while QBE Insurance (Other OTC: QBEIF - news) Group Ltd declined 0.3 percent.

The S&P/ASX 200 index added 7.7 points to 5,300.5 by 0213 GMT. The benchmark rose 0.5 percent on Tuesday, but tumbled 5.9 percent for September, its biggest monthly loss since May 2012.

Markets remain cautious on the protests in Hong Kong, while the rout in September was driven by a rise in bond yields, a weaker Australian dollar and a slump in iron ore prices.

Iron ore ended September with its biggest monthly loss since May after falling to its lowest since 2009 in a rout that traders say looks likely to continue after a week-long holiday in top consumer China.

BHP Billiton Ltd was flat, and Rio Tinto Ltd (Xetra: 855018 - news) skidded 0.7 percent, after sustaining deep losses of 7.6 percent and 4.9 percent in September.

U.S. stocks slipped on Tuesday, dragged down by energy and materials shares as economic data disappointed. Major indexes also posted losses for the month, but ended the quarter with gains.

Elsewhere housing and construction stocks were supported by data showing home prices in Australia's capitals rose marginally in September, though slowing after three straight months of strong gains. Goodman Group (Other OTC: GMGSF - news) climbed 1.9 percent, while Scentre Group (Other OTC: STGPF - news) gained 1.1 percent.

Sedgman Ltd jumped 2.5 percent after the company said it has been awarded a A$36.7 million contract to expand Cocakatoo Coal Ltd 's Baralaba coal mine.

New Zealand stocks were turning soft after a flat start, with the benchmark NZX50 index down 0.2 percent at 5,245.18.

Among the leading companies there were modest gains. The number two stock, telecoms company Spark, was 0.7 percent higher at NZ$2.99, but Contact Energy (NZSE: CEN.NZ - news) dipped 1.3 percent to NZ$5.90.

Synlait Milk was 1.8 percent higher at NZ$3.46, a six-week high, after Chinese authorities approved it as a retail infant formula maker.

A handful of companies, including top-10 stock Auckland International Airport, shed their dividend payment rights. (Reporting by Thuy Ong; Editing by Eric Meijer)