June 6, 2019 / 6:37 AM / 12 days ago

CORRECTED-Australian shares rise for third day as rate cut spurs banks

(Corrects third paragraph to say the benchmark index closed 0.4% higher, not 4%, at 6,383 points, not 6,395.1)

By Devika Syamnath

June 6 (Reuters) - Australian shares rose for a third straight day on Thursday, with banks gaining sharply on expectations that this week’s central bank rate cut and other easing measures could stimulate the cooling economy and boost lending.

The country’s biggest lender, Commonwealth Bank of Australia , closed at its highest level in more than a year.

Australia’s S&P/ASX 200 index ended 0.4%, or 24.5 points higher at 6,383.

Elsewhere, Wall Street strengthened overnight but broader Asian shares were cautious on fears a looming U.S. trade war with Mexico would further depress global growth.

Australia’s four biggest banks strengthened between 0.4% and 0.8%, two days after the central bank lowered rates to a record low and cemented prospects of cheaper debt that could spur loan demand.

“For all those people who were hesitant to borrow money to invest in or buy a property, they have three big reasons to go ahead,” said Christopher Conway, senior investment adviser at Marcus Today.

In addition to the rate cut, the Australian Prudential Regulation Authority (APRA) loosened borrowing restrictions recently and a federal election was out of the way, Conway said.

He also said Australia and New Zealand Banking and Westpac Banking have protected their margins by not passing on the rate cut fully and this “could encourage some buying back into the sector.”

Those factors offered a welcome boost to the financial sector, which lost billions in value last year, hurt by damaging revelations out of a quasi-judicial inquiry amid tightening margins due to a weak housing market.

Oil and gas heavyweight Santos and smaller peer Carnarvon Petroleum both gained, despite weak oil prices weighing on the energy index, after a well they jointly own was confirmed as a major oil and gas find.

Carnarvon closed at its highest in over nine months.

Mining stocks capped gains on the main index, with sector behemoths BHP Group and Rio Tinto dipping 1.3% and 2.8%, hit by weaker iron ore and copper prices.

New Zealand’s benchmark S&P/NZX 50 index was 0.3% higher at 9,987, helped by healthcare stocks. Fisher & Paykel Healthcare Corp gained 2.4%.

Reporting by Devika Syamnath in Bengaluru; Editing by Kim Coghill

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