Australia shares gain 0.7 pct, miners, banks support as RBA outcome eyed

(Adds analysis, quotes, stocks on the move)

SYDNEY, Nov 5 (Reuters) - Australian shares rose on Tuesday morning, as miners gained on rising iron ore prices while banks recovered ahead of the outcome of the Reserve Bank of Australia's policy-setting meeting later in the day.

A positive day on Wall Street provided early momentum, with investors sitting back to await more U.S. data for clues on when the U.S. Federal Reserve will start to trim its stimulus.

"Investors [will also be] anticipating key U.S. non-farm payroll data due Friday night for more Fed Reserve tapering clues," said Tracey Warren, stockbroking sales executive at CMC Markets Stockbroking in a note to clients.

The benchmark S&P/ASX (Other OTC: ASXFF - news) 200 index was hovering near five-year highs, rising 0.7 percent to 5,427.7 in subdued trading by 0014 GMT.

Activity thinned out ahead of the Melbourne Cup horse races in Victoria later in the day, with 108.7 million shares trading hands in early trade, compared to a year-to-date daily moving average of 687 million shares.

Westpac Banking Corp (Other OTC: WEBNF - news) added 0.9 percent, recovering from a drop in the previous session, while the Commonwealth Bank of Australia rose 0.7 percent.

Flagship miner BHP Billiton Ltd climbed 0.9 percent and rival Rio Tinto Ltd (Xetra: 855018 - news) rallied 1.7 percent as Chinese iron ore futures rose for a fourth session in a row on Monday, supported by firmer outlook for demand as steel prices recovered.

Defensives also supported the market. Telstra Corporation (Berlin: TSTA.BE - news) Ltd edged 0.2 percent higher while Woolworths Ltd rose 0.3 percent.

A strong earnings season, particularly led by banks, and a recovering economy have driven a rally in the Australian market, although uncertainty over the Fed's stimulus has checked demand recently.

Investors were keeping an eye on the RBA's meeting although no surprises are expected.

Australia's central bank is almost certain to leave interest rates unchanged for a third month amid signs past cuts are filtering through to economic activity, particularly in the housing market.

"Yesterday's economic releases entrenched widely held expectations that the RBA will leave interest rates unchanged," said CMC (BSE: CMCSL.BO - news) 's Warren, referring to upbeat retail sales and house price data.

Elsewhere, Whitehaven Coal Ltd jumped 3.4 percent, recouping all of the previous session's losses after its chairman said on Monday the company sees no need to raise equity .

Panoramic Resources Ltd slumped 15.4 percent to A$0.27, a two-week low after the company said it will raise up to A$15.12 million via a two tranche placement, with a maximum of A$10 million to be raised via a share purchase plan.

New Zealand's benchmark NZX 50 index rose 0.2 percent to 4,919.4.

(Reporting by Thuy Ong; Editing by Shri Navaratnam)