Feb 21 (Reuters) - Australia shares rose on Monday as the prospect of a diplomatic solution to the Russian-Ukraine standoff boosted investor sentiment, while the country's biggest power producer AGL Energy marked its best session after rejecting a premium buyout bid.

The benchmark S&P/ASX 200 index reversed course to end 0.2% higher at 7,233.6, after falling to a two-week low earlier in the session. The benchmark had closed 1% lower on Friday.

Heightened geopolitical risks combined with inflationary concerns have added to the pressure on global markets in recent weeks.

U.S. President Joe Biden and his Russian counterpart Vladimir Putin agreed in principle to hold a summit on the Ukraine crisis, raising hopes for reaching a diplomatic solution.

Further lifting risk appetite, Australia fully reopened its international borders to travellers vaccinated against the coronavirus after nearly two years of pandemic-related closings.

Shares of AGL Energy jumped as much as 13% after turning down a surprise $3.54 billion takeover approach from billionaire Mike Cannon-Brookes and Canada's Brookfield Asset Management.

"The market is very edgy at the moment and it is trying to jump on anything positive," said Mathan Somasundaram, chief executive officer, Deep Data Analytics.

Gold stocks advanced 0.5%, with heavyweights Newcrest Mining and Northern Star Resources gaining 0.9% and 1.4%, respectively.

The "Big Four" banks advanced between 0.1% and 1.4% to help financial stocks close 0.6% higher.

Since major sectors have already reported their results, Somasundaram pointed that individual stocks with even slightly disappointing results might pose a risk for markets this week.

Technology stocks caught the tailwind from a weak finish on Wall Street to drop 2.7% while healthcare shares retreated 1.3%.

Across the border, the Reserve Bank of New Zealand is expected to raise rates for the third meeting in a row, a Reuters poll found.

New Zealand's benchmark S&P/NZX 50 index closed 0.1% higher to finish the session at 12,156.34. (Reporting by Himanshi Akhand in Bengaluru; Editing by Sherry Jacob-Phillips)