* Shares nearly flat after 3 days of gains
* Set for weekly gain after 3 weeks of losses
* 98 shares up, 88 down and 14 unchanged (Adds analysis, quotes, stocks on the move)
By Pauline Askin and Gyles Beckford
SYDNEY/WELLINGTON, July 17 (Reuters) - Australian shares ran out of steam on Friday after a three-day rally as investors sold off banks and resources stocks, ignoring positive leads from global markets.
Investors shrugged off gains in other Asian markets that were aided by a stronger finish on Wall Street after Europe moved to reopen funding to Greece’s stricken economy.
The S&P/ASX 200 index, which hit a three-week high on Thursday, opened stronger but then changed course. It was roughly flat at 5,668.6 by 0245 GMT, and on track for its first weekly gain in three.
“It’s a bit hard to make sense of it all today. We haven’t really followed leads from overseas which have been a little bit stronger,” said Damien Boey, equity strategist at Credit Suisse.
He said there is “a lot of nervousness around” about the Federal Reserve raising interest rates in September, which could have a “disproportionately bad influence on the Asia Pacific region”.
Australian shares are up nearly 5 percent this year, with most of that gain coming this week, when the index will have its first weekly gain since mid-June. The index fell each month from March through June, led by losses in resources and bank shares.
On Friday, all major banks fell with Commonwealth Bank down 0.4 percent and ANZ Bank slipping 0.7 percent.
Weaker commodities dragged mining shares down. Rio Tinto and BHP Billiton were down 1.1 percent and 0.5 percent, respectively. Santos Ltd fell nearly 2 percent after its Q2 revenue fell.
Gold miner Regis Resources surged as much as 22 percent after it announced a share buyback while retailer Metcash jumped 4.3 percent to its highest since July 3.
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New Zealand’s benchmark NZX50 share index touched a two week-high before trimming its gains to sit 0.2 percent higher at 5,837.46 with modest gains for a fourth consecutive session.
The index could have a gain of about 2 percent this week.
Improving risk sentiment and a selective search for yield saw gains outnumber the falls two-to-one.
Among the leaders Contact Energy was up 1.6 percent to a three-week high while software developer Xero was 1.4 percent higher.
Among strong-performing smaller stocks were jewellery retailer Michael Hill International up 3 percent after it reported a lift in same store sales and revenue.
Steel and Tube rose 5.7 percent after saying it would buy a maker of steel fastenings. (Additional reporting by Swati Pandey; Editing by Richard Borsuk)