* ASX200 flat, banks fall for second session
* Better-than-expected Chinese GDP buoys sentiment (Adds analysis, quotes, stocks on the move)
By Thuy Ong and Naomi Tajitsu
SYDNEY/WELLINGTON, July 16 Australian shares traded flat on Wednesday, with gains in big miners on the back of improving iron ore prices and a slight pick-up in Chinese GDP offseting worries sparked by U.S. Federal Reserve Chair Janet Yellen's comments about overvalued stocks.
Banks lost ground for a second session, with top bank by market capitalisation Commonwealth Bank of Australia and Westpac Banking Corp, the second biggest, both losing 0.4 percent.
Analysts said a government-backed report on Tuesday that called for increased capital requirements to support housing loans and other changes that could reduce revenue were possible negatives for financial stocks.
On Wall Street, stocks pulled back overnight after Yellen and other Fed policymakers raised concerns about "substantially stretched valuations" in some sectors.
The S&P/ASX 200 index had slipped 3.3 points to 5,508.0 by 0211 GMT. The benchmark ended flat on Tuesday.
After a promising start to the year, the market has lost momentum, shuffling sideways after hitting a near-six-year high of 5,554.5 on April 29 due to falling iron ore prices and a drop in consumer confidence after an austere federal budget.
"It's very quiet, not much of a lead for our market from offshore, and very quiet in terms of deal flows at the moment," said Simon Twiss, a partner at Arnhem Investment Management.
Benchmark 62 percent grade iron ore for immediate delivery to China .IO62-CNI=SI rose 1 percent to $98.00, its highest in almost seven weeks, as firmer steel prices in top market China spurred buying interest in the raw material.
Global iron ore miner BHP Billiton Ltd added 0.3 percent, while rival Rio Tinto Ltd climbed 1.2 percent to a three-month high of A$63.84 after reporting a sharp rise in iron ore output.
Fortescue Metals Group leapt 3.9 percent after reporting a 53 percent increase in fiscal 2014 shipments.
Elsewhere, sentiment was helped by data that showed China's economy grew 7.5 percent between April and June, reinforcing hopes that a recovery was under way. China is Australia's top export market.
Sirius Resources was the best-performing stock on the ASX 200, bouncing 16.6 percent to its highest since March 2013 at A$4.00 after an exploration update reported a high-grade nickel, copper and platinum discovery at its Taipan prospect.
"We did see an interesting number with regards to its nickel project," said Evan Lucas, a market strategist at IG.
"Sirius Resources is techinically an exploration play. A jump like that would suggest that there's possibly a deal for something coming."
New Zealand's benchmark NZX-50 index slipped 3 points to 5,112.40, led by losses in agricultural supplier PGG Wrightson and Sky TV New Zealand
Further losses were limited by a 3 percent jump in Westpac , which rebounded from a near-four-month low hit on Tuesday, when Australian banks sold off after the financial review. (Editing by Alan Raybould)