* 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 .AXJO 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. .AXFJ gained as much as 0.9% to its highest since March 2018. Westpac Banking Corp WBC.AX rose 1.4% and National Australia Bank NAB.AX 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 .AXEJ saw limited gains as oil prices edged up after falling overnight on demand concerns. O/R
Woodside Petroleum WPL.AX was up 0.2% and Caltex Australia CTX.AX gained 0.3%.
Mining stocks .AXMM fell 2.3% as iron ore prices fell on Wednesday after Brazil's Vale SA VALE3.SA won approval to resume some processing operations which were halted over concerns about the stability of its dams. IRONORE/
Miners of the steel making material, BHP Group BHP.AX and Rio Tinto (LON:RIO) RIO.AX dropped 2.4% and 4.3%, respectively, while Fortescue Metals Group FMG.AX 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. the Tasman Sea, New Zealand's benchmark S&P/NZX 50 index .NZ50 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. & Paykel Healthcare Corp FPH.NZ rose 1.9% and a2 Milk Co added 1.8%.