Andrada Mining. Share News (ATM)

By Aditya Soni

March 27 (Reuters) - Australian shares recovered on Tuesday,tracking a surge in U.S. stocks, as reports of behind-the-scenestalks between United States and China raised hopes that adestructive trade war could be avoided.

The S&P/ASX 200 index rose 0.6 percent or 33.7points to 5,824.6 by 0100 GMT. The benchmark declined 0.5percent on Monday.

Wall Street recorded its best day in 2-1/2 years and the DowJones Industrial Average posted its third-biggest point gainever on Monday.

"There was a big bounce in the U.S. market so we are doingthe relief rally bounce," said Mathan Somasundaram, marketportfolio strategist, Blue Ocean Equities.

But Somasundaram added that this bounce would be short-termbecause there were structural issues that could already be seenin the form of problems with global growth.

Following a strong cue from U.S. financials, banksled the rally locally. The Australian financials indexrose as much as 0.8 percent, its biggest intraday percentagegain in more than two-weeks.

Commonwealth Bank of Australia, the country's toplender by market capitalisation climbed 0.7 percent, whileWestpac Banking Corp rose 0.4 percent.

Materials stocks also contributed to the gains despite lowermetals prices.

Somasundaram said materials stocks were rising becauseinvestors were buying on sentiment without consideringunderlying themes.

Global miner BHP rose 0.5 percent, while its rivalRio Tinto Ltd strengthened 0.9 percent.

Fortescue Metals Group Ltd fell 2.7 percent to itslowest in more than 18 months after cutting its price guidanceon iron ore sales for the year to end-June 2018.

The 1.4 percent fall in Newcrest Mining,Australia's largest independent gold miner, was among thebiggest drags on the benchmark.

Newcrest said it would recommence mining operations at itsflagship Cadia mine on Tuesday but all mined ore would bestockpiled on the surface until processing restarted.

In New Zealand, the benchmark S&P/NZX 50 index rose0.8 percent or 68.5 points to 8,500.91.

Consumer staples and health care stocks led the gainers,with a2 Milk Company Ltd surging about 3 percent, whileFisher & Paykel Healthcare Corporation Ltd rose 1.7percent.

(Reporting by Aditya Soni in BengaluruEditing by Eric Meijer)