MELBOURNE, Nov 14 (Reuters) - Australian shares dipped to fresh seven-week lows on Wednesday as investors trod carefully after the market's sudden drop this week.
By 0014 GMT the benchmark S&P/ASX 200 index was up 0.1 percent or 4 points, though gains in top miners, banks and defensive stocks such as Telstra Corp were offset by weakness in gold producers and energy firms.
A successful bond auction in Greece lent some support. But investors are increasingly nervous the looming U.S. fiscal cliff will hit economic growth and could even tip the world's largest economy into recession. That could in turn reduce growth in China, Australia's biggest export market.
Credit Suisse equity strategist Damien Boey told Reuters the onus was now on policymakers, but economic theorists were divided between whether austerity and stimulus were best to solve their debt and growth dilemmas.
"It's really a case of picking the dog with the least fleas. It's a really unenviable task leading a country like (U.S. President Barack) Obama has chosen to do," Boey said.
"People are saying that if all that's going to happen is we're going to kick the can down the road and in another six months or a year we're going to face exactly the same situation, well I don't like that future. So there's a big change in sentiment (toward stimulus)," he said.
Boey said Australia had not kept pace with changes in other large economies since the global financial crisis and the nation faced "accumulated risk" and was "behind the curve."
"That's why our market has underperformed. It's ironic that we have the superior (economic) growth but we have the worst sharemarket performance, precisely because there hasn't been any (economic) adjustment here," he said.
The benchmark S&P/ASX 200 index was up 4.2 points at 4,383.8 by 0013 GMT.
It earlier fell to 4,372, its lowest since Sept. 28. It dropped 1.5 percent to 4,379.8 on Tuesday.
"In the short term, the name of the game is closing above the psychological 4,400 mark," said Ben Le Brun, analyst at Options Xpress.
New Zealand's benchmark NZX 50 index fell 0.3 percent to 3,960.2. New Zealand retail sales volumes fell a seasonally adjusted 0.4 percent in the September quarter, 30, against expectations for a rise of 0.5 percent.
* Fairfax Media rose 4 percent to A$0.40 after it sold its United States rural media business for $US79.9 million to Penton Media..
* CSR rose 4.2 percent to A$1.62 after reporting net profit for the half year of A$20.4 million. CSR said it saw some encouraging signs of a recovery in housing construction beyond the current year.
* BHP Billiton rose 0.2 percent to A$33.81 after it agreed to sell its Canadian EKATI diamond operation to Harry Winston for $500 million. BHP has been narrowing its portfolio to focus on larger, long-life assets.
"I still worry about the resources stocks. I'm not sure we've seen the worst of the slowdown behind us in China. The whole bottoming argument in China is still predicated on the U.S. and Europe being okay," said Boey.
* Lynas shares were placed on trading halt pending a court announcement in Malaysia regarding its controversial rare earths plant. (Reporting by Miranda Maxwell; Editing by Eric Meijer)