* Woodside makes informal takeover approach for Oil Search
* U.S. index futures are trading higher
* Trading volatile as investors watch China moves (Adds analysis, quotes, stocks on the move)
SYDNEY/WELLINGTON, Sept 8 (Reuters) - Australian shares rose on Tuesday as rising United States index futures firmed while Woodside Petroleum's WPL.AX $8 billion takeover approach for Oil Search OSH.AX boosted confidence in energy stocks overall.
Papua New Guinea-focused Oil Search said Woodside had made an approach just before the start of trade, sending its shares up as much as 17 percent and prompting optimism about further takeover activity in a sector grappling with a low oil price. ID:nL4N11E08M
Rival producer Santos STO.AX , which said it was open to M&A activity last month as it reported the low oil price had hit profits, leapt 9 percent.
Meanwhile, while U.S. markets were closed for Labor Day on Monday, index futures ESc1 0#1YM: were higher, suggesting Wall St will rise when trading resumes the following day.
By 0230, the S&P/ASX 200 index .AXJO was up 52.6 points or 1.1 percent at 5,083.0, its biggest percentage gain since Aug. 27.
As Australian investors monitored wild swings on Chinese stock exchanges, the index has fallen 8 percent in the past month with moves of more than 1 percent in 9 of the past 16 sessions.
"The fact is with volatility where it is at the moment, a 1 percent gain is neither here nor there," said IG Markets institutional dealer Chris Weston.
"The M&A shows some of the big companies are prepared to look at some of the multiples," Weston added, referring to Woodside's Oil Search approach. "That has been sending some positive signals."
Woodside was down 3 percent.
Iron ore majors BHP Billiton (LONDON:BLT) BHP.AX and Rio Tinto (LONDON:RIO) RIO.AX both gained about 2 percent, while BHP spin-off South32 S32.AX rose 4.2 percent after the prices of some base metals advanced.
Banks were also higher as investors bought back into a sector which has been sold down heavily in 2015 amid tough new capital rules. Commonwealth Bank of Australia CBA.AX and Australia and New Zealand Banking Group ANZ.AX were both up about 2 percent, while Westpac Banking Corp WBC.AX and National Australia Bank NAB.AX were up 1 percent.
New Zealand's benchmark NZX50 share index .NZ50 rose 44.36 points or 0.8 percent to 5,617.09, pulling back from a two-week low the previous day, as telecommunications and healthcare-related shares boosted the market.
Telecommunications retailer Spark SPK.NZ rose 2.3 percent and network operator Chorus CNU.NZ rose 1.6 percent after a government report raised hopes of improvement in the country's broadband infrastructure. ID;nNZS8goa
Ryman Healthcare RYM.NZ rose 2.7 percent as investors picked up shares in the retirement home operator which had fallen sharply during the market's sell-off in the past few weeks.
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