Australia shares hit 2-week highs as Fed shift calms nerves

(Adds analysis, quotes, stocks on the move)

SYDNEY, Dec 20 (Reuters) - Australian shares rose 0.9 percent to a two-week high on Friday morning, spurred by reduced uncertainty over the Federal Reserve's stimulus-tapering plans though a fall in resource stocks checked broader gains.

Financials underpinned the local market. The Commonwealth Bank of Australia, the biggest bank by market capitalisation, added 1.1 percent while Westpac Banking Corp rose 1 percent. Mid-tier Bank of Queensland Ltd (Other OTC: BKQNY - news) climbed 1.1 percent.

The S&P/ASX (Berlin: AUX.BE - news) 200 index added 43.8 points to 5,246.0 by 0027 GMT. The benchmark rose 2.1 percent on Thursday, its biggest one-day jump since July and is set to gain 2.9 percent for the week, snapping four consecutive weeks of losses.

The local market recovered from 4-month lows touched last week after the Fed announced this week a plan to trim its monthly bond purchases by $10 billion to $75 billion beginning in January, and pledged to maintain ultra-low interest rates.

The taper decision eased months of uncertainty over the Fed's intentions, giving equity investors somewhat of a clear path ahead, analysts said.

"We were sort of like bunnies stuck in the headlights ahead of the Fed announcement," said John Milroy, investment adviser at Macquarie Private Wealth.

"Our sense is there's still a fair way to go (in terms of tapering), interest rates will be at low levels for an extended period and that's the key really," Milroy said, adding that he expects the market to rally some 600 points to 5,800 levels by the end of 2014.

Elsewhere, Telstra Corporation Ltd is selling its majority stake in its Hong Kong-based mobiles business CSL (Other OTC: CMXHF - news) to HKT Ltd for A$2 billion, even as it says it is committed to the Asia region in the long-term. Shares in the telecommunications company rose 0.8 percent.

The mining sector capped broader gains as resource stocks fell after copper suffered its biggest fall in 3 weeks and gold fell 2 percent to a six-month low.

Heavyweight Rio Tinto Ltd slipped 0.2 percent while bullion producer Newcrest Mining Ltd plumbed 3.4 percent.

Austin Engineering Ltd rallied 8.8 percent after it announced a successful $30 million capital raising exercise at a premium of A$3.20 per new share.

UXC Ltd tumbled 11.7 percent after the company said its underlying profit before tax will be in the range of A$7-8.5 million as margin pressure and project delivery issues have had a "dampening effect" on underlying earnings.

New Zealand's benchmark NZX 50 index was flat at 4,706.2.

(Reporting by Thuy Ong; Editing by Shri Navaratnam)