Australia shares rise as investors seek value in banks, miners

* US, UK, Europe, HK on holiday

* Small gains magnified

* Iron ore picks up (Adds analysis, quotes, stocks on the move)

SYDNEY/WELLINGTON, May 25 (Reuters) - Australian shares rose the most in a month on Monday, shrugging off weaker U.S. markets, as investors swooped on cheap bank stocks after months of selling and as a rebound in iron ore prices triggered demand for resources stocks.

Trading was light because of public holidays in the United (Shenzhen: 000925.SZ - news) States, the United Kingdom, Germany, France and Hong Kong, so investors looked past global factors and picked stocks that have been sold off in recent months, dragging the market down some 5 percent since early April.

The S&P/ASX 200 index rose 63.2 points or 1.1 percent to 5,727.9 by 0238 GMT, its biggest single-session advance since April 24.

"It's popping the price up faster than it would normally because there isn't the same amount of volume in the market," said IG Markets strategist Evan Lucas.

Banks led the across-the-board gains, after being sold down because of concerns that tough new capital requirements will limit dividend growth.

Commonwealth Bank of Australia (Other OTC: CBAUF - news) and Australia and New Zealand Banking Group rose 1.2 percent each, while Westpac Banking Corp and National Australia Bank added 0.8 percent.

Miners also firmed after the spot price of iron ore ended the previous week with a gain. BHP Billiton (NYSE: BBL - news) and its newly-listed spin-off of non-core assets, S32 both gained 1 percent, while Rio Tinto (Xetra: 855018 - news) advanced 1.7 percent.

Smaller iron ore rival Fortescue Metals Group jumped 4 percent.

Energy stocks rose even after oil price declined, with Woodside Petroleum (Xetra: WOPA.DE - news) up 2.3 percent, Oil Search gained 1.3 percent and Santos jumped 2.7 percent.

Airline Qantas, which benefits from lower fuel prices, rose 2.6 percent.

Nickel developer Sirius Resources jumped 22 percent and recruiting firm Skilled Group rose 12 percent, both after receiving takeover approaches.

New Zealand's benchmark NZX50 share index rose 25.50 points or 0.4 percent to 5,801.61, boosted by a jump in the utilities sector after Contact Energy (NZSE: CEN.NZ - news) announced a special dividend.

Shares (Berlin: DI6.BE - news) in the energy generator and retailer jumped 14 percent as investors cheered the company's decision to pay out cash in the absence of investment opportunities in the sector.

Contact's gains boosted sentiment in other power companies, nudging Mighty River Power (Stuttgart: MRY.SG - news) 0.4 percent, while utilities investors Infratil rose 0.3 percent.

Bathroom fixture maker Methven (NZSE: MVN.NZ - news) rose 0.9 percent after it announced a 21 percent rise in full-year profits.

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(Reporting by Byron Kaye and Naomi Tajitsu; Editing by Kim Coghill)