Australia shares jump 1 pct to 5-1/2 yr highs, David Jones soars on takeover bid

(Adds analysis, quotes, stocks on the move)

SYDNEY, April 9 (Reuters) - Australian shares climbed to 5-1/2 year highs on Wednesday morning as department store operator David Jones rocketed on a $2 billion takeover bid, triggering a buying frenzy in the retail sector.

A rebound on Wall Street overnight had already given the market the early impetus, and an uptick in gold prices drove bullion miners up.

The spotlight was on David Jones Ltd, which went on trading halt on news it had agreed to a takeover offer from Woolworths Holdings that valued the company at around A$2.15 billion ($2 billion). The shares had soared 25 percent to the takeover bid price of A$4.00, and was up 22.9 percent at A$3.92 at the time of the trading halt.

The corporate activity stirred the retail sector. Rival department store operator Myer Holdings Ltd jumped 5.7 percent, and Harvey Norman Ltd climbed 4.1 percent. JB Hi-Fi Ltd gained 2.8 percent.

"They are very, very heavily shorted," said Shawn Hickman, managing director at Market Matters in Sydney, referring to the retail stocks. He said the takeover bid for David Jones is acting as a catalyst for a strong rally in the sector.

The S&P/ASX 200 index added 55 points to 5,465.6 by 0206 GMT, surpassing the March 10 peak of 5,462.3. The benchmark has recovered from a low of 5,288.5 touched on March 20 as China took modest steps to stimulate a slowing economy, and as investors piled into cheaper stocks.

Improved consumer confidence data on Wednesday further underpinned trading.

The 'Big Four' banks recouped some of their recent losses. Westpac Banking Corp added 1 percent, while Commonwealth Bank of Australia (Other OTC: CBAUF - news) was up 0.8 percent.

Miners also posted modest gains as Shanghai steel rebar futures hit one-month peaks amid optimism Chinese demand will remain firm after a sustained drop in stockpiles since the start of March. BHP Billiton Ltd rose 1 percent, and Lynas Corp Ltd bounced 3.6 percent. Among gold, Beadell Resources Ltd jumped 5.1 percent as bullion rose 1 percent overnight.

Dart Energy Ltd advanced 4.8 percent. The company said it has completed the sale of its entire interests in Xiushan shale gas project to an existing partner for a nominal consideration.

Worley Parsons Ltd soared 6.3 percent after the engineering group announced a restructuring of its business lines to boost margins from next financial year.

New Zealand's benchmark NZX 50 index added 0.6 percent to 5,061.4.

(Reporting by Thuy Ong; Editing by Shri Navaratnam)