Australia shares up, hopes pinned on 11th-hour Greece deal

* Australian shared edge up for second day

* Index lost 5.5 percent in June

* Investors hoping Greece will stay in Euro - analyst (Adds analysis, quotes, stocks on the move)

By Charlotte Greenfield and Gyles Beckford

SYDNEY/WELLINGTON, July 1 (Reuters) - Australian shares rose on Wednesday as investors clung to hopes that an 11th-hour deal will be struck to keep Greece in the euro.

The S&P/ASX 200 index rose 0.5 percent, or 27.890 points, to 5486.900 to by 0156 GMT. The benchmark climbed 0.7 percent on Tuesday, but lost 5.5 percent in June thanks to the Greek crisis, a persistent slowdown in China and a slackening domestic economy.

"At the moment the market is still dominated by what's happening in Greece," said Damien Boey, an equity strategist at Credit Suisse (NYSE: CS - news) .

"People are taking some of the overnight comment that Greece will not exit the euro as being positive," he said.

Greece on Tuesday became the first developed economy to default on a loan with the International Monetary Fund. The fund said the country had asked for a last-minute repayment extension earlier on Tuesday, which its board would consider "in due course."

The financial sector led gains with QBE Insurance Group up 2.1 percent and AMP up 1.5 percent.

The mining sector lost 0.16 percent after Australia cut its price forecast for iron ore in 2015 on Tuesday.

Fortescue Metals dropped 4.4 percent and Alumina Ltd lost 4.2 percent.

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New Zealand stocks had a second consecutive session of solid gains as investors put concerns about Greece's debt woes to one side and looked to buy back top stocks that had been battered earlier in the week.

The benchmark NZX-50 share index was 0.8 percent higher at 5,775.81, with power companies particularly in demand.

Contact Energy (NZSE: CEN.NZ - news) , the market's number four stock by capitalisation, was up 2.4 percent, while Meridian Energy and Mighty River Power (Stuttgart: MRY.SG - news) were each around 2 percent higher.

Meridian said it had agreed to a one-month extension for its biggest customer, a Rio Tinto (LSE: RIO.L - news) owned aluminium smelter, to decide on its future power needs.

The market's energy utilities sub-index was up 1.5 percent.

Auckland International Airport was up 2.8 percent, and there were gains of more than 1 percent for casino operator Sky City, telecommunications company Spark.

Retailing stocks remained in favour with clothing retailer Hallenstein Glasson up 1.8 percent, and discounter The Warehouse Group up 1.1 percent, as investors waited for details of Briscoe group's takeover offer for outdoor goods and clothing company Kathmandu.

(Editing by Shri Navaratnam)