Australia shares up 0.7 pct on banks, Yellen remarks

(Adds analysis, quotes, stocks on the move)

SYDNEY, Nov 14 (Reuters) - Australian shares gained 0.7 percent on Thursday morning, led by a recovery in banks and on dovish remarks from Federal Reserve Vice Chair Janet Yellen.

Index-heavy banks staged a solid rebound, with Commonwealth Bank of Australia rising 0.9 percent and Westpack Banking Corp climbing 1.6 percent.

The S&P/ASX (Other OTC: ASXFF - news) 200 index rose 40.0 points to 5,59.2 by 0100 GMT. The benchmark fell 1.4 percent on Wednesday, the biggest one-day percentage drop since Sept. 30.

The market got early momentum from Wall Street, which ended at record highs on Wednesday, driven by Macy's strong results.

Risk assets also took comfort after Yellen, in remarks prepared for delivery to the Senate Banking Committee on Thursday, said the Fed has "more work to do" to help the economy.

The Fed's No. 2, who was recently nominated by President Barack Obama to head the Federal Reserve, has been widely seen as holding a more dovish bent than current Fed chief Ben Bernanke.

Yellen's statement suggested stimulus tapering was more likely to occur later rather than in December or January, IG (LSE: IGG.L - news) 's market strategist Evan Lucas said.

"That statement alone has changed the landscape of trade today. It might also prompt the RBA to talk down the Australian dollar again," Lucas said.

Rio Tinto Ltd (Xetra: 855018 - news) inched up 0.5 percent and Fortescue Metals Group Ltd rose 1.2 percent after its chairman said at the annual meeting on Tuesday that the company expected to achieve investment grade metrics by 2015.

BHP Billiton (NYSE: BBL - news) narrowed its opening losses and was last down 0.1 percent after it said on Tuesday that a minor earthquake closed down operations at its Perseverance mine in western Australia, which will lower its nickel production in the current quarter.

James Hardie Industries surged 14 percent. The stock raced to an all-time high of A$12.07 earlier on a sharply higher first half net profit.

Department store David Jones jumped 4.6 percent after it said on Wednesday that UBS AG (Xetra: UB0BL6 - news) had become a substantial holder of the company.

New Zealand's benchmark NZX 50 index added 2.2 points to trade at 4,920.8. (Reporting By Maggie Lu Yueyang; Editing by Shri Navaratnam)