News: NSR Australia shares resume slide, bottom fishing trims losses

MELBOURNE/WELLINGTON, Jan 14 (Reuters) - Australian shares slid 1.8 percent by midday on Thursday, back in the red after a brief respite on better-than-expected Chinese data in the previous session, as investors latched on to a slide in oil prices as a sign of weaker economic growth.

The S&P/ASX 200 index (xjo) fell 87.09 points to 4,899.5, by 0107 GMT. The benchmark rose 1.26 percent on Wednesday, its first gain in nine sessions.

The drop on Thursday was not as bad as futures had suggested, with battered stocks such as top miner BHP Billiton (BHP) and its spin-off South32 both climbing off recent lows, helping to pare the market's overall losses.

"I'm optimistic. We'll probably end in the red, but the fear in the market is a little overdone," said Richard Herring, trading director at broker Burrell & Co, adding that he sees mining stocks as oversold.

The biggest losers were a mix of energy, retail and mining stocks, with the oil sector pummelled after Brent crude prices sank to a near 12-year low on worries about growing U.S. oil inventories.

Oil and gas producer Santos Ltd (STO) sank nearly 9 percent to a 20-year low.

Gold miners dominated on the positive side, after safe-haven gold prices rose for a second day. Northern Star Resources (NSR) the market's top gainer.

Macquarie Private Wealth director Martin Lakos said trading in markets continued to diverge from what's happening in real economies.

"Markets are trading (to reflect) high levels of risk and economic decline, and Macquarie's view is that we just don't see that, both here and in China and certainly not in the U.S.," Lakos said.

New Zealand's benchmark S&P/NZX 50 index (nz50) fell 0.9 percent, or 53 points, to 6,099.02 on a lack of any positive stock specific news and on worries about weak energy prices, U.S. corporate earnings and the global economy.

"It's a sea of red," said Christchurch-based Craigs Investment Partners broker Alex Dalzell.

The biggest loser was software firm Xero (XRO), down 3.9 percent, after tech stocks fell hard on Wall Street.