Australia shares underpinned by banks; Karoon Gas rockets 40 pct

* Karoon Gas surges on news to sell stake in Browse Basin

* Miners continue to fall as iron ore slumps (Adds analysis, quotes, stocks on the move)

By Thuy Ong

SYDNEY, June 2 (Reuters) - Australian shares clawed higher on Monday, buoyed by another record close on Wall Street, with strength in banks like Commonwealth Bank of Australia (Other OTC: CBAUF - news) helping offset losses in miners.

Karoon Gas Ltd soared over 40 percent to a four-month high on news it will sell its stake in Poseidon Browse Basin assets to Origin Energy Ltd for up to $800 million. Origin Energy (Frankfurt: ORL.F - news) dropped 3.3 percent.

The S&P/ASX 200 index was up 0.2 percent or 18.5 points at 5,511.0 at 0237 GMT, after losing 0.5 percent on Friday.

Market moves were modest as investors awaited economic data due in the coming days including retail sales, gross domestic product and the trade balance, traders said.

"It's somewhat an anticipation of some of the numbers out this week that may be market moving," said Kara Ordway, market maker and trader at City Index in Sydney.

"We're coming into the end of financial year at the moment, so occasionally we'll see some falling around that time in local markets but at the moment global markets are looking really stable," she added.

The local benchmark hit a near six-year high of 5,554.5 on April 29, but has traded mostly sideways since, as a slump in iron ore prices has hit index-heavyweight resource stocks.

Iron ore fell another 4 percent on Friday and dropped for a sixth straight month in May, its longest losing streak on record, due to a supply glut.

In the mining sector on Monday, BHP Billion Ltd lost 1.5 percent and Rio Tinto Ltd (Xetra: 855018 - news) shed 0.6 percent.

But the market found support from gains in the Big Four banks, which have drawn strong demand for their relatively high yields.

Commonwealth Bank of Australia added 0.8 percent, Australia and New Zealand Banking Group rose 0.6 percent and National Australia Bank gained 0.8 percent.

Sai Global Ltd rose 2.2 percent to a two-year high of A$5.23 after the risk management and standards firm said it has been approached by a number of parties expressing interest in its business.

New Zealand markets were closed for the Queen's Birthday holiday. (Editing by Chris Gallagher)