* Financials rose up to 0.9% to 16-mth high
* Miners drop 2.3% as iron ore prices slump
* Westpac forecasts 2 rate cuts by NZ cenbank this year
By Niyati Shetty
July 25 (Reuters) - Australian shares rose on Thursday, with the benchmark index nearing a 12-year high and the sub-index for financial stocks at its highest since March 2018 as investors expected imminent interest rate cuts in Europe and the United States.
The S&P/ASX 200 index climbed 0.4%, or 23.5 points, to 6,800.20 by 0203 GMT, building on the previous day’s 0.8% gain.
Disappointing manufacturing activity surveys from Europe and the United States hardened expectations that the European Central Bank will cut is policy rate later in the day, and for the U.S. Federal Reserve to cut rates next week.
Financials gained as much as 0.9% to its highest since March 2018. Westpac Banking Corp rose 1.4% and National Australia Bank was up 0.9%.
Australian banks have been concerned about their margins after two rate cuts by the Reserve Bank of Australia this year, and with more expected going ahead, but lower U.S. rates will alleviate some of the pressure by enabling them to borrow U.S. dollars more cheaply.
The energy index saw limited gains as oil prices edged up after falling overnight on demand concerns.
Woodside Petroleum was up 0.2% and Caltex Australia gained 0.3%.
Mining stocks fell 2.3% as iron ore prices fell on Wednesday after Brazil’s Vale SA won approval to resume some processing operations which were halted over concerns about the stability of its dams.
Miners of the steel making material, BHP Group and Rio Tinto dropped 2.4% and 4.3%, respectively, while Fortescue Metals Group fell 5.4%.
Fortescue in its quarterly production results on Thursday forecast stronger iron ore shipments in 2020, but also flagged higher costs as it raises output to meet demand from China.
Across the Tasman Sea, New Zealand’s benchmark S&P/NZX 50 index rose 0.59%, or 61.95 points, to 10,874.49.
Westpac on Thursday forecast that the country’s central bank would cut rates twice this year.
Fisher & Paykel Healthcare Corp rose 1.9% and a2 Milk Co added 1.8%. (Reporting by Niyati Shetty in Bengaluru; Editing by Simon Cameron-Moore)