By Daniel Inman

Australia outperformed Asian stock markets Tuesday, with major resource shares and banks gaining in Sydney after the Reserve Bank of Australia kept rates steady, while Japan was supported by a weaker yen.

The Australian dollar AUDUSD -0.8887% fell to 92.08 U.S. cents from 92.24 U.S. cents after the Reserve Bank of Australia kept rates unchanged at 2.75%. Expectations for a rate cut this month were low, though the market is expecting another cut before the end of the year.

Tokyo Stock Exchange Enlarge Image
Japan’s stocks were supported by a stronger yen.
The Reserve Bank of Australia said that the local currency remains high despite its recent depreciation, having dropped around 10% against its U.S. counterpart since the beginning of May.

Australia’s S&P/ASX 200 AU:XJO +2.63% ended up 2.6% at 4834.00 — its best daily performance since October 2011 — bouncing back from a sharp 1.9% decline on Monday brought about by weak manufacturing data from China. Miners led the recovery after commodity prices rose overnight: BHP Billiton AU:BHP +3.35% and Rio Tinto AU:RIO +2.59% were up 3.7% and 2.6% respectively.

Banks also staged a decent rebound after Monday’s selloff, with Australia & New Zealand Banking Group AU:ANZ +2.01% up 2.4% and Commonwealth Bank of Australia AU:CBA +2.03% 2% higher.

Markets in Hong Kong missed China’s manufacturing data, which hit a nine-month low, due to a public holiday on Monday. As a result, the Hang Seng Index HK:HSI -0.70% underperformed other regional markets — falling 0.7% to 20658.65.

PetroChina Co. HK:857 +6.67% PTR -0.60% shot 6.7% higher in Hong Kong after China’s top planner announced an increase on gas prices that will come into effect on July 10.

In contrast, the Shanghai Composite CN:SHCOMP +0.57% gained 0.6% to 2006.56, as the market continued to recover from last month’s liquidity squeeze that pushed the index down 14% in June.

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More broadly, there was a positive lead from the U.S., where Wall Street finished higher after the Institute for Supply Management’s purchasing managers index for June rose slightly more than expected. The result was the latest piece of data pointing to strength in the world’s largest economy, and comes before the much-watched monthly labor report due at the end of this week.

The U.S. data gave the dollar a push higher against the yen, extending its 0.6% overnight gain to 99.65 yen late in Asia. In recent sessions, the dollar has crept closer to the ¥100 mark, a much-watched level that was crossed in early May, leading to a fresh round of buying in Japanese stocks.

Japanese shares moved higher, helped by the weaker yen. The Nikkei JP:NIK +1.78% was up 1.8% at 14098.74.

Exporters in Tokyo were buoyed by the softer currency: Toyota Motor Corp. added 2.8% and Mazda Motor Corp. was up 4.4%.

Elsewhere in the region, South Korea’s Kospi KR:SEU -0.04% finished the day unmoved at 1855.02, while Singapore’s Strait Times Index was last up 1%.