* Banks and material stocks lead gains
* Mining giants produce solid rises
By Shriya Ramakrishnan
Jan 18 (Reuters) - Australian shares climbed to a more than two-month high early on Friday, with banks and material stocks leading gains as renewed hopes for a thaw in the U.S.-China trade war boosted risk appetites.
At 0058 GMT, the S&P/ASX 200 index .AXJO was up 0.5 percent or 29.9 points to 5,880, which put it up 1.8 percent for the week. The benchmark rose 0.3 percent on Thursday.
Trade-related optimism revived after the Wall Street Journal reported U.S. Treasury Secretary Steven Mnuchin discussed lifting some or all tariffs imposed on Chinese imports and suggested offering a tariff rollback during the next round of trade talks scheduled for Jan. 30. U.S. stocks pared some of their gains after a Treasury spokesperson told CNBC that Mnuchin had not made any such recommendations. .N
Damien Hennessy of investment adviser Heuristic Investment Systems in Melbourne said the uncertainty that battered stocks in 2018 has been "diminished somewhat" by Federal Reserve signals of a likely pause in tightening and by comments on the U.S.-China dispute.
Financial stocks .AXFJ , which account for nearly half the benchmark, climbed 0.7 percent and were poised for a fifth straight session of gains.
Biggest lender Commonwealth Bank of Australia CBA.AX firmed 0.8 percent to a near five-month high even as it flagged non-cash losses of about A$169 million ($121.44 million) in the first half. other "Big Four" banks rose between 0.4 percent and 0.7 percent.
The metals and mining sector .AXMM also lent support, rising 0.8 percent to touch an over 3-month high.
Global mining giant Rio Tinto (LON:RIO) RIO.AX gained as much as 1.3 percent after its 2018 iron ore shipments from Australia's Pilbara region rose 2 percent and it set a higher target for 2019. world's biggest miner BHP Group BHP.AX , due to report second-quarter production next week, climbed 0.9 percent.
The resources sector, a key driver of the Australian economy, was poised for a second straight advance, helped by gains in copper and iron ore prices. MET/L IRONORE/
Payment service provider Afterpay Touch Group APT.AX surged 11.5 percent to its highest since Oct. 9, after saying underlying sales in the first half rose to more than A$2.2 billion.
New Zealand's benchmark S&P/NZX 50 index .NZ50 rose 0.2 percent or 15.78 points to 9,093.59.
Financials and industrial stocks led gains, with New Zealand shares of Australia and New Zealand Banking Group ANZ.NZ rising 1.4 percent, and dairy company Synlait Milk SML.NZ strengthening 0.8 percent.
($1 = 1.3916 Australian dollars)