Australia shares bounce through the gloom after being oversold

* Commodities still falling

* Sluggish economic data

* Stocks oversold (Adds analysis, quotes, stocks on the move)

By Byron Kaye

SYDNEY/WELLINGTON, Dec 3 (Reuters) - Australian shares rose nearly 1 percent on Wednesday as investors shrugged off disappointing economic data and further declines in commodities prices to buy oversold stocks cheaply.

Overnight, closely watched oil and iron ore prices continued to fall, along with those of other key commodities, putting more pressure on the country's resources sector.

Adding to the gloom, Australia's economy grew by just 0.3 percent in the three months to September 30, the Australian Bureau of Statistics said, compared to the 0.7 percent economists forecast, suggesting the economy is not as strong as previously thought.

Still, the S&P/ASX 200 index continued the previous session's recovery after plunging nearly 4 percent in two sessions. The benchmark was up 0.8 percent or 41.64 points at 5322.9 at 0110 GMT.

"I'm not surprised to see a bit of a hiccup given we've been savaged and we've been overdone," said IG Markets strategist Evan Lucas.

Sending large minining stocks like iron ore producers BHP Billiton and Rio Tinto (Xetra: 855018 - news) to multi-year lows was "probably uncalled-for" and just made those stocks more attractive to investors seeking yield, Lucas added.

BHP was up 0.3 percent at A$30.49 and Rio added 0.4 percent to A$58.18. Iron ore major Fortescue Metals Group recovered 6 percent to A$2.72 after several analysts said the stock, which is trading at a two-thirds discount to its year high, was undervalued.

Oil producers were mixed. Woodside Petroleum (Other OTC: WOPEF - news) added 2 percent to A$35.57 while Santos dropped 2 percent to A$9.04.

Flagship carrier Qantas Airways, which benefits from cheaper fuel costs, jumped 4 percent to A$2.03.

Banks were firmer as more economists suggested sluggish economic data will lead to an interest rate cut, spurring investment. Westpac Banking Corp was up 0.8 percent at A$32.99 and Commonwealth Bank of Australia (Other OTC: CBAUF - news) was up 6 percent at A$81.26.

New Zealand's benchmark NZX50 index edged up 13.8 points or 0.3 percent to 5,443.86, bouncing back from a one-month intraday low of 5,401.443 the previous day.

Telco Chorus jumped 6 percent to a 14-month high of NZ$2.66 ($2.07), extending gains made on Tuesday when it said its earnings would benefit from proposed relaxed price controls.

Larger rival Spark fell 1.8 percent to NZ$2.95 after saying the regulations would hurt its earnings.

(Editing by Eric Meijer)