By Cecile Lefort and Rebecca Howard
SYDNEY/WELLINGTON, Nov 20 (Reuters) - Australian shares extended gains on Friday after a spike in risk sentiment put them on track for their second largest weekly increase in four years.
The S&P/ASX 200 index .AXJO added 0.4 percent to 5,264.1 by 0220 GMT, following a 2.1 percent rally on Thursday. The benchmark was set to show an increase of 4.1 percent this week and if sustained it would be the second largest such rise since 2011.
Much of the gains came from financial sector stocks, which amount for more than half of the index.
National Australia Bank NAB.AX and Westpac Bank WBC.AX each gained around 1.2 percent each, while ANZ Bank ANZ.AX and Commonwealth Bank of Australia CBA.AX added around 1 percent. Overall, the financial sector rose 5 percent so far this week.
The heavyweight resources sector also extended gains with Newcrest Mining NCM.AX up 1.5 percent and BHP Billiton (L:BLT) BHP.AX 0.9 percent higher. Dealers said the stocks had been recently oversold.
Department stores operator Myer Holdings MYR.AX and clothes retailer Kathmandu KMD.NZ made big inroads after upbeat sales growth. Myer climbed to a two-1/2-month peak to be up 4.8 percent, while Kathmandu powered up 5.7 percent.
Law firm Slater and Gordon was not so lucky, having tumbled nearly 10 percent after it said past financial reporting errors had undermined confidence in the firm.
New Zealand's benchmark NZX 50 index rose 0.2 percent or 11 points to 6,005.98 on Friday.
The biggest gainers were retirement village owner and operator Ryman Healthcare, which rose 2.4 percent after reporting a rise in its half-year profit and said it is on track for 15 percent profit growth for the full year.
"It's ticking all the boxes," said Christchurch-based Craigs Investment Partners advisor Alexandra Dalzell.
The biggest losers included Tower which shed 5.5 percent. Earlier the company said it expects to report a full-year net loss, largely due to claims provisions related to the Canterbury rebuild.