The Australian sharemarket finished little changed on Tuesday as a second day of heavy selling in Commonwealth Bank and the major lenders offset strong gains in the mining sector and CSL.

The S&P/ASX 200 Index added 9 points, or 0.1 per cent, to 8677.20 at the close – the second-highest close on record after Friday’s peak. But it earlier rallied as much as 0.5 per cent before slipping into the red as investors dumped bank stocks.

While six out of the 11 sectors finished higher, financials were by far the biggest drag, with the sector now down 5.3 per cent from its recent peak in June to trade at a seven-week low. The mining sector, on the other hand, jumped more than 2 per cent.

Correction territory

CBA slumped 3.1 per cent to $172.42, wiping roughly 30 points from the index due to its market heft. It was the bank’s biggest one-day drop since early April and brings its total decline from its recent peak to 9.9 per cent – just 0.1 per cent off the technical threshold for a correction.

The other major lenders followed suit, with National Australia Bank falling 2.7 per cent to $37.22, Westpac 1.3 per cent to $32.65 and ANZ closed down 0.8 per cent to $29.82.

IG market analyst Tony Sycamore cited several reasons for the bank sell-off, including stretched valuations, profit-taking, and the long-awaited rotation away from financials and into the resources sector.

“There is also a theory that some investors are taking the lead of Warren Buffett, who has been reducing his US bank holdings due to uncertainty around Trump’s tariffs and his attacks on [Federal Reserve chairman Jerome] Powell,” Sycamore said.

Mining stocks tracked the rally in iron ore, with prices hitting a five-month high, boosted by China’s supply-side reforms for the steel industry and plans for a massive dam project in Tibet.

Rio Tinto jumped 3.4 per cent to $118.32, Fortescue 3.3 per cent to $17.81 and BHP gained 2.6 per cent to $41.51 per cent.

Gold miners were also strong as gold hit a five-week high amid rising risk aversion ahead of a US tariff deadline on August 1. Shares of Ramelius surged 8.1 per cent to $2.66 – its best day in 15 weeks, while Newmont gained 2.8 per cent to $92.

Investors also continued to pile back into index heavyweight CSL, sending the shares up 3.4 per cent to $263.95, its highest price since March. The shares have rallied 10 per cent this month despite the looming threat of US pharmaceutical tariffs.

Stocks in focus

In company news, Insignia Financial was the best performer on the ASX 200, surging 12.2 per cent to $4.41 after CC Capital agreed to a $3.3 billion deal to acquire all shares at $4.80 per share.

Champion Iron rallied 5.2 per cent to $5.07, the highest level since March, after it signed an agreement with Nippon Steel and Sojitz to form a partnership for the development of its Kami iron ore project in Canada.

Perpetual rose 0.7 per cent to $20.60 as it said it was accelerating plans to restructure J O Hambro Capital Management and was still in talks over a sale of its wealth management division. Assets under management lifted 2.5 per cent in the June quarter to $226.8 billion.

And New Zealand-based Genesis Energy added 1.2 per cent to $2.17 after it signed a non-binding term sheet to keep one of its Huntly Rankine units online through to 2035.