By Colin Packham and Rebecca Howard
SYDNEY/WELLINGTON, Feb 1 (Reuters) - Australian shares rose more than 1 percent on Monday, climbing for a third consecutive session, as the Bank of Japan's decision to cut a benchmark interest rate below zero buoyed market sentiment.
The S&P/ASX 200 index .AXJO gained 1.2 percent, or 62 points to 5,067.5 by 0245 GMT, which followed an advance of 0.6 percent on Friday.
The index has been on an upward trend since hitting a more than a two-year trough of 4,803.9 on Jan. 18.
"The market is playing catch-up to what we saw on Friday on Wall Street as the market digested the decision of the Bank of Japan to cut interest rates, and what that means for global growth," said Evan Lucas, market analyst at IG.
Financials led the way, firming nearly 0.5 percent across the sector. Shares in ANZ Banking Group ANZ.AX and Suncorp Group SUN.AX both gained more than 2 percent, while National Australia Bank NAB.AX rose nearly 1.5 percent.
Australia health stocks rallied strongly, led by Japara Healthcare Ltd JHC.AX , which rose more than 5 percent.
Analysts said market direction was now likely to be determined by the Reserve Bank of Australia's interest rate decision on Tuesday and corporate earnings, beginning next week.
Wall Street surged over 2 percent on Friday.
New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.3 percent or 20 points to 6,189.92 on Monday.
Among the biggest gainers was New Zealand Refining NZR.NZ , which climbed 1.6 percent on an improvement in oil prices.
Among the biggest losers was Ryman Healthcare RYM.NZ which shed 1.0 percent. Earlier the company announced it had bought its third retirement village site in Melbourne Australia.
(By Colin Packham and Rebecca Howard; Editing by Edwina Gibbs)