* Markets hold back ahead of 2018 Australia budget
* Financials lead in Australia
* New Zealand breaks 4 sessions of gains
By Ambar Warrick
May 8 (Reuters) - Australian shares hit a three-month high on Tuesday, led by financials after Australia and New Zealand Banking Group hinted at a share buyback and as local firms tracked a firmer Wall Street finish.
The S&P/ASX 200 index .AXJO rose 22.8 points, or 0.38 percent, to 6,107.4 by 0257 GMT. The benchmark rose 0.4 percent on Monday.
Sentiment however, was slightly cautious ahead of the federal budget, due to be announced later in the day, with the government expected to announce hefty health and infrastructure spending and deliver tax cuts. market is waiting for a direction from the budget, and at this point I would say it is pretty positive," said James McGlew, executive director for corporate stockbroking at Perth-based Argonaut.
Financials, which account for about 37 percent of the index by market capitalisation, were the biggest boosts, with Australia and New Zealand Banking ANZ.AX rising about 1.4 percent after it flagged a buyback of A$1 billion-A$1.5 billion ($749.90 million-$1.12 billion) three other major commercial banks were also higher.
Investment bank Macquarie Group MQG.AX extended gains into a fourth session, rising about 1.6 percent after clocking a record annual profit last week.
Healthcare stocks were the second biggest boost to the index, with the sector putting on more than 1 percent.
Healthscope Ltd HSO.AX rose more than 4 percent after Canada's NorthWest Healthcare Properties REIT NWH_u.TO said it had acquired a 10 percent stake in the company. company CSL Ltd CSL.AX touched a record high and was among the biggest boosts to the Australian benchmark.
Consumer staples were among the few drags on the index, with department store operator Woolworths WOW.AX and wine seller Treasury Wine Estates Ltd TWE.AX falling about 1 percent each.
Australia's retail sales were surprisingly soft in March with spending falling on everything from clothes to restaurants, hinting that inflation might fall below expectations in the months to come. stocks were also lower, as Woodside Petroleum WPL.AX fell about 1.2 percent. The stock was the biggest drag on the benchmark energy index .AXEJ . Energy retailer Origin Energy ORG.AX also fell about 1.2 percent.
Oil prices retreated from three-and-a-half-year highs on Tuesday as investors waited on an announcement by U.S. President Donald Trump on whether the United States will reimpose sanctions on Iran. O/R
New Zealand stocks fell slightly, breaking four straight sessions of gains as consumer staples fell.
New Zealand's benchmark S&P/NZX 50 index .NZ50 fell 14.88 points or 0.17 percent to 8,573.06.
Dairy producer a2 Milk Co ATM.NZ , one of the largest stocks on the index, snapped four sessions of gains and fell nearly three percent. The stock was the biggest drag on the benchmark and pulled it down about 27 points. ($1 = 1.3335 Australian dollars)