* Aussie shares trading higher on Wall Street
* Investors to eye Chinese manufacturing data due at 0145 GMT (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Naomi Tajitsu
SYDNEY/WELLINGTON, May 22 (Reuters) - Australian shares rose 0.7 percent on Thursday, buoyed by gains on Wall Street and an uptick among local banks, while investors awaited a Chinese manufacturing survey later in the day for clues about growth in Australia's largest export market.
All 'Big Four' banks rose, with top lender Commonwealth Bank of Australia adding 0.5 percent.
Overnight, spot iron ore prices fell for a fourth straight day to a 20-month low, pressured by weak buying interest from china, the world's top consumer of the steelmaking raw material.
Meanwhile heavyweight miners Rio Tinto Ltd (Xetra: 855018 - news) and BHP Billiton Ltd added 0.4 percent and 1.2 percent each, recovering modestly after being sold off over the past week. Investors will also eye the Chinese HSBC flash manufacturing PMI for May due at 0145 GMT.
"If the PMI number is outside of expectations significantly it will affect the big three, Rio, BHP, Fortescue", said Shawn Hickman, managing director at Market Matters
"The market is a bit 50/50, so we just want to see it play its hand, the whole region is up around 0.4 percent, there's not a great deal at the moment."
Australia's benchmark index has been drifting sideways in May, pulled down by top-tier banking stocks with investors booking profits as shares have reached record highs, but underpinned by robust earnings.
Worries over geopolitical tensions in Ukraine and slumping iron ore prices have also dampened investor appetite.
U.S. stocks rose overnight, rebounding from the previous day's broad selloff, after minutes of the Federal Reserve's last meeting showed central bankers have discussed the eventual tightening of monetary policy but made no decisions on which tools to use.
Treasury Wine Estates Ltd dropped 1.2 percent. The stock had gained some 24 percent in the previous two sessions after it rejected a $2.9 billion bid from Kohlberg Kravis Roberts & CO LP, spurring talks of offers from other parties.
James Hardie Industries PLC (Other OTC: JHIUF - news) jumped 2.8 percent after the home building products manufacturing announced its fourth quarter net sales were higher at A$376.4 million while also ananouncing a special dividend of $0.20 per security.
Caltex Australia (Other OTC: CTXAY - news) gained 2.3 percent after receiving confirmation from the Australian Competition and Consumer Commission (ACCC), who will not oppose its acquisition of the fuel division of Scotts Group.
New Zealand's benchmark NZX 50 index edged up 0.4 percent to 5,130.25, as gains in transport company Freightways and Fisher & Paykel Healthcare helped the index to recover from a one-month low hit on Wednesday.
Fisher & Paykel Healthcare is expected to announce an increase in full-year profits when it posts results on Friday, after the medical equipment maker raised its profit forecast to NZ$97 million ($82.97 million) earlier this year.
Shares in telecommunications network operations Chorus Ltd tumbled roughly 4 percent after the industry regulator said it would delay a final decision on broadband pricing.
"(The delay) pushes out the time frame of the pricing issue possibly being resolved. It has added uncertainty ... and that would be seen as negative," said Michael Milne, investment advisor at Craigs Investment Partners.
But Milne added that the delay would give the company the opportunity to offer more input into the pricing process, which could be beneficial in the longer term.
Investors awaited full-year results from online accounting software developer Xero later in the day for more hints into the fast-growing company's performance in the United States, where it has been expanding aggressively.
(Reporting by Thuy Ong; Editing by Kim Coghill)