* ASX heads for biggest weekly drop since Dec.6
* Miners boosted by strong iron ore prices
* All 'big four' banks trade higher
By Nikhil Subba
Jan 3 (Reuters) - Australian shares rose over 1% on Friday, tracking gains on Wall Street as investors cheered China's policy easing move and a private survey showing solid growth in production last month.
The S&P/ASX 200 index .AXJO gained 1.2% to 6,769.50 by 0209 GMT, after settling 0.1% higher on Thursday. However, it was down about 1% for the week, heading for its biggest weekly drop since the week ended Dec. 6.
Wall Street's three major indexes closed at records highs on Thursday after the People's Bank of China said it would lower the amount of cash that all banks must hold as reserves, releasing around 800 billion yuan ($114.87 billion) in funds to shore up the slowing economy.
Additionally, a survey showed Chinese production activity in December continued to grow and business confidence strengthened, indicating a recovery in the world's second-largest economy in the wake of a Phase 1 trade deal with the United States. stimulus measure "allows more opportunity for investment and growth in the Chinese economy ... and it certainly helps our companies that have a lot to do with trade," said James Tao, a market analyst at CommSec.
China is Australia's largest trading partner, and the health of the domestic economy relies a lot on its trade with the Asian nation.
"Mining, obviously being our largest export to China, will certainly see some benefit," Tao added.
Mining stocks .AXMM rose as much as 1.3%, heading for their best session in a week, on strong iron ore prices. The sub-index has declined 0.4% so far this week after three straight weeks of gains.
BHP Group BHP.AX , the world's largest miner, advanced 1.4% in its best intraday gain since Dec. 16, while peer Rio Tinto (LON:RIO) RIO.AX rose 1.8% to one-week high.
Financials .AXFJ strengthened 1.4%, their biggest intraday percentage gain since Dec. 16. On a weekly basis, the sector was on course for its biggest decline since the week ended Dec. 6.
All the 'big four' banks were trading in the positive territory.
Stronger oil prices helped the energy sub-index .AXEJ gain 0.9%, with Woodside Petroleum WPL.AX climbing 0.8%, while Santos STO.AX advanced nearly 1%.
Healthcare stocks .AXHJ rose 2%, driven by industry heavyweight CSL's CSL.AX over 2% gain.
New Zealand's benchmark S&P/NZX 50 index .NZ50 advanced 0.6% to 11,555.97 as markets resumed trade after two days of holidays. Auckland Airport AIA.NZ and Sky Network Television SKT.NZ were the top gainers.
The benchmark was down 0.4% on a weekly basis, on track for its biggest drop since the week ended Oct. 25, 2019. ($1 = 6.9642 Chinese yuan)