* Mining stocks boost the index

* Markets wait for possible RBA rate cut on Tuesday

* NZ flat after scaling record high earlier in session

By Ambar Warrick

July 1 (Reuters) - Australian shares started the week higher as a U.S.-China trade ceasefire prompted risk-on buying, while the possibility of a local interest rate cut also lent support to equities.

The United States and China agreed on Saturday to restart trade talks after their respective heads of state met on the sidelines of a G20 summit in Japan.

The S&P/ASX 200 index rose 0.5% or 35.4 points to 6,654.20 by 0148 GMT. The benchmark fell 0.7% on Friday.

For the day, mining stocks were the biggest contributors to gains, with the subindex adding about 0.7%. Miners BHP Group and Rio Tinto, the two largest stocks on the ASX 200, gained more than 1% each.

Strength in mining stocks was primarily driven by stronger iron ore prices over the past quarter. Iron ore prices in China saw their best quarter in 2-1/2 years on expectations that supply would remain tight.

Defensives such as healthcare stocks also rose, with heavyweights CSL and Resmed rising about 0.9% and 1.3%, respectively, as the trade truce spelt better prospects for their biggest market, the United States.

Markets were also pricing in a possible interest rate cut by the Reserve Bank of Australia (RBA). Nearly 70% of the 40 economists surveyed by Reuters last week expected the RBA to cut the cash rate to a record low 1.00% at its monthly meeting on Tuesday.

The RBA had last month cut rates for the first time in nearly three years, prompting large flows to equities. The bank had later also said further cuts were likely in order to shore up Australia's slowing economy.

Local financial stocks saw some easing after posting their best second quarter since 2009. Commonwealth Bank of Australia , the country's largest lender, fell about 1%, having added more than 17% over the past quarter. The stock had also scaled a near 2-year high on Friday.

The effects of another rate cut on the country's "big four" banks also remain to be seen, given that the reduced cost of lending would push down their margins but increase their volumes.

New Zealand stocks traded sideways, having added about 6.7% over the previous quarter. The local stocks of Westpac Banking Corp and Australia and New Zealand Banking Group fell 0.8% and 1.5%, respectively.

New Zealand's benchmark S&P/NZX 50 index was 6.08 points lower at 10,495.02. The index had ended at a record high on Friday, and scaled a fresh high on Monday before inching lower.

Dairy products exporter Synlait Milk gained about 2.5% on better prospects over China, which is one of its largest export markets. (Reporting by Ambar Warrick in Bengaluru; Editing by Christopher Cushing)