Australia shares snap 3 days of fall; rise 0.5 pct

* Index up 7.53 pct YTD

* BHP, Westpac, CBA, Rio among top movers by index weight

* CSL (Other OTC: CMXHF - news) , Woolworths, IAG, QBE among bottom movers by index weight

* 121 shares up, 66 down, 13 unchanged (Adds analysis, quotes, stocks on the move)

By Swati Pandey and Naomi Tajitsu

SYDNEY/WELLINGTON, May 1(Reuters) - Australian shares gave up early losses to rise 0.5 percent on Friday led by gains in financials and resources sectors after China's official factory data came in better-than-feared and as bargain buyers emerged after steep losses in the last three sessions.

The S&P/ASX 200 index rose 28.3 points to 5,818.3 by 0248 GMT. The benchmark slipped 0.8 percent on Thursday.

The index fell for the second straight month in April and posted its worst monthly performance since last November weighed by falling iron ore prices while nerves over next week's Reserve Bank of Australia (RBA) interest rate policy meeting have kept banks under pressure.

"If the last few days of April is anything to go by, it's looking like a case of sell in May and go away," said Adam Halantas, Head (Other OTC: HEDYY - news) of Equity Analysis at Australian Stock Report.

"Sentiment towards the banks has turned negative in recent days, hurting the wider market sentiment."

Since the RBA cut its cash rate to 2.25 percent in February the ASX benchmark has been moving in a 5,750-5,996 range, failing four times to breach the 6,000-points barrier. Analysts expect the market to head back towards the bottom of that band if the RBA keeps rates steady on Tuesday.

Data from China, which showed the country's manufacturing activity grew slightly, helped revive sentiment. China is Australia's No. 1 trading partner.

On Friday, the major banks were back in black with Westpac and ANZ up about 0.6 percent. Major miners BHP Billiton and Rio Tinto (Xetra: 855018 - news) rose about 2 percent.

Fortescue Metals (Dusseldorf: FVJ.DU - news) surged 6.5 percent after Australia's competition watchdog said it won't pursue the miner over its call to cap iron ore output.

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New Zealand's benchmark NZX50 index slipped 24.4 points or 0.4 percent to 5,766.93 in early trade, trimming gains made on Thursday when the bourse posted its biggest daily gain in two months.

Investors booked profits made in some of the country's largest companies after Thursday's rally lost momentum.

Large-cap construction and telecommunications shares led the losses, with Fletcher Building (NZSE: FBU.NZ - news) falling 1.3 percent.

Spark, the country's largest telecommunication services provider, fell 0.8 percent.

Cloud-based accounting software developer Xero (Frankfurt: 0XE.F - news) fell 1.5 percent, easing after sources told Reuters that its Australian competitor MYOB had raised A$833 million in an initial public offer, at the upper end of its target range. (Editing by Simon Cameron-Moore)