Australian shares rebound but trim gains as Iran denies US talks

By Anjali Singh

March 24 (Reuters) - Australian shares closed higher on Tuesday, underpinned by miners, but trimmed early gains after Iran denied reports of any negotiations with Washington, while investors remained cautious ahead of a key domestic inflation reading this week.

The benchmark S&P/ASX 200 index .AXJO closed 0.2% higher at 8,379.40 points, but remained on track for its worst month since March 2020 if the current losing momentum persists.

Early optimism, driven by comments from U.S. President Donald Trump suggesting talks with Iran to end the war, faded after Tehran denied any such discussions, dampening hopes of a near-term resolution.

Investor caution persisted amid concerns the conflict could intensify inflationary pressures in an already overheated economy, with markets widely bracing for February's inflation reading due on Wednesday.

Sentiment was further hit by data showing Australian consumer confidence fell to its lowest level in more than half a century last week, as higher borrowing costs and a surge in petrol prices clouded the economic outlook.

"Traders can absorb one shock at a time - right now they are staring at two simultaneously, and either one alone is capable of rattling markets in no time," Hebe Chen, market analyst at Vantage Markets said, adding that if data on Wednesday shows inflation hardening, "the market's already fragile footing gets thinner."

Miners .AXMM gained 3%, snapping a three-session losing streak, supported by "selective dip-buying after a very deep selloff," according to Chen. The sector had shed about 9% over the previous three sessions and roughly 19% since the Middle East conflict erupted in late February.

Shares of global miners Rio Tinto RIO.AX and BHP BHP.AX advanced 2.2% and 3%, respectively.

Gold miners .AXGD climbed 3.1%, while industrials .AXNJ added 0.4%.

Rate-sensitive financials .AXFJ fell 1.3%, with three of the "Big Four" banks losing between 1.8% and 4.5%, while ANZ Group ANZ.AX rose 0.5%.

Energy stocks .AXEJ slipped 0.4%, marking their fourth decline since the war erupted.

Across the Tasman Sea, the New Zealand benchmark S&P/NZX 50 index .NZ50 fell 1.5% to 12,701.75 points.

Earlier in the day, Reserve Bank of New Zealand Governor Anna Breman flagged need of higher interest rates if inflationary pressures persist.