Materials pick up on improved commodity prices Financials prop...

• Materials pick up on improved commodity prices
• Financials prop up the benchmark
• Main index ends at highest close in more than 3 weeks

(Updates to close)

Feb 1 (Reuters) - Australian shares rose on Thursday, underpinned by strong gains in mining stocks and financials, with sentiment boosted by news of robust expansion in Australian manufacturing last month.

The S&P/ASX 200 index (xjo) climbed 0.9 percent or 52.4 points to 6,090.1, its highest close since Jan. 10. The benchmark added 0.3 percent on Wednesday.

Australian manufacturing posted solid expansion last month with demand, both domestic and offshore, strong enough to allow firms to raise prices to protect profit margins, a survey showed on Thursday.

"Overall, commodities are positive, U.S. dollar still remains under pressure which further helps materials," said Mathan Somasundaram, market portfolio strategist at Blue Ocean Equities.

Chinese steel futures rose on Thursday, after four days of losses while U.S. oil prices extended modest gains. [IRONORE/][O/R]

Materials stocks were sought after, with mining giant BHP Billiton (BHP) up 1.5 percent and rival Rio Tinto Ltd (RIO) gaining 1.1 percent.

Growth in China's manufacturing sector was steady in January, data showed. China is a crucial market for Australian mining firms.

Financials led the gainers, with the sectoral index .AXFJ gaining 1.2 percent.

The Australian Prudential Regulation Authority (APRA) released a progress report on Thursday into an inquiry into the Commonwealth Bank of Australia (CBA) (CBA), but reserved its observations on governance, culture and accountability for the final report due by the end of April.

CBA's shares rose 1.5 percent and were the main index's biggest support.

New Zealand's benchmark S&P/NZX 50 index (nz50) fell 0.7 percent or 58.14 points to 8,383.87 on broad-based declines.

Utilities and health care stocks dragged most on the index, with Contact Energy Ltd (CEN) declining 2.3 percent and Fisher & Paykel Healthcare Corp Ltd (FPH) losing 1.1 percent.