* BHP lowest since global financial crisis
* Banks benefit from bargain hunting
* U.S. rate hike casts cloud over investor optimism
SYDNEY/WELLINGTON, Nov 11 (Reuters) - Australian shares edged higher on Wednesday as heavy selling in miner BHP Billiton (L:BLT) BHP.AX following a deadly industrial accident at a Brazilian mine undercut a bounce in bank stocks.
BHP, the world's largest miner, saw its shares fall to their lowest intraday level since 2008 after a dam burst at a mine it partly owns, resulting in at least six deaths and dozens more missing. urn:newsml:reuters.com:*:nL1N1351L8
The selloff eroded gains in the bank sector as investors bought financial stocks that have been heavily sold this year amid tough new capital rules and fears of a housing slowdown.
The S&P/ASX 200 index .AXJO was up 0.2 percent or 8.3 points at 5,107.5 by 0134 GMT. The benchmark is down nearly 6 percent this year.
"The losses in BHP are well and truly offset by the gains in the banks," said James McGlew, executive director of corporate stock broker Argonaut Ltd.
Investors are also cautious ahead of an expected U.S. rate hike in December.
"There is a need in the market to have this out and done and dealt. You might get a short, sharp turn down but this will probably underpin a nice rally through the Christmas time once it is out," McGlew added.
BHP Billiton was down 2.6 percent and its spin-off South32 S32.AX was off by 2.2 percent, while rival Rio Tinto (L:RIO) RIO.AX was flat and iron ore giant Fortescue Metals Group FMG.AX rose 3 percent.
Energy stocks were also weaker, with Woodside Petroleum WPL.AX down 0.3 percent and Origin Energy ORG.AX down 1.4 percent, while Oil Search added 0.5 percent.
Australia and New Zealand Banking Group ANZ.AX led the banks higher, up 2.6 percent, while Commonwealth Bank of Australia CBA.AX rose 1.5 percent and National Australia Bank NAB.AX added 1 percent. Westpac Banking Corp WBC.AX fell 2.2 percent after trading ex-dividend.
Major retailers were also stronger. No. 1 supermarket firm Woolworths WOW.AX edged 0.3 percent higher and Wesfarmers WES.AX rose 0.4 percent.
New Zealand's benchmark NZX 50 index .NZ50 gained 0.2 percent or 12.4 points to 6,015.22, in sight of a record peak touched earlier in the week. The index has jumped about 8 percent this year.
New Zealand's central bank highlighted increasing risks to the financial system from weak dairy prices and soaring property markets. urn:newsml:reuters.com:*:nL3N1355CT
a2 Milk Company ATM.NZ was the most actively traded stock, up 4.9 percent.
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