* ASX benchmark posts biggest gain since October 2008
* Miners mark best day since late November 2008, up 10.5%
* Aussie banks can absorb the increase in credit losses - S&P (Updates to close)
By Nikhil Subba
March 17 (Reuters) - Australian shares jumped nearly 6% on Tuesday, recouping some of the ground lost in their biggest rout since 1987 in the previous session, as the central bank pumped extra cash into the financial system in a ramped-up bid to stabilise battered markets and confidence.
The S&P/ASX 200 index .AXJO made big gains towards the end of the session, settling 5.8% higher at 5,293.40 in its biggest rise since October 2008 after Monday's near 10% dive.
The Reserve Bank of Australia (RBA) pumped A$8.8 billion ($5.40 billion) into the system, well above its original intention of A$2.06 billion, and promised to announce a new package of stimulus measures on Thursday, as the coronavirus pandemic threatened to drain liquidity and push up borrowing costs. assume the central bank will also lower its cash rate to 0.25%.
"The RBA injection is the main reason why there is some topside recovery today," said Nick Twidale, director & co-founder at brokerage X-chainge.
Leading the recovery, the mining sector .AXMM soared 10.5% in its biggest gain since late November 2008. BHP Group BHP.AX strengthened nearly 12%, while peer Rio Tinto (LON:RIO) RIO.AX advanced 6.9% to a one-week high.
Financial stocks .AXFJ added 9.2%, with all the 'Big Four' lenders closing in positive territory.
"Australian banks can absorb the increase in credit losses and disruption to funding markets due to the COVID-19 outbreak without posing any immediate or significant risks to the banks' creditworthiness," S&P Global analysts said in a note.
Major supermarket retailer Woolworths Group WOW.AX climbed nearly 10%, its best since late October 1997, while rival Coles Group COL.AX closed 8.4% higher after brokerage UBS upgraded the stock.
UBS said it saw all Australian supermarket chains making stronger profits in the second half of the year following a coronavirus-led panic buying in recent weeks.
New Zealand's benchmark S&P/NZX 50 index .NZ50 reversed earlier gains to close 0.5% lower at 9,434.74.
The government said it would pump NZ$12.1 billion ($7.32 billion) into the economy to slow a contraction expected from the coronavirus outbreak. International Airport AIA.NZ ended 2.3% weaker, while Vista Group VGL.NZ closed down 11%. ($1 = 1.6297 Australian dollars) ($1 = 1.6529 New Zealand dollars)