* Financials pull ASX higher
* BHP trades ex-dividend
* Strong U.S. manufacturing data (Adds analysis, quotes, stocks on the move)
By Byron Kaye and Gyles Beckford
SYDNEY/WELLINGTON, September 3 Australian shares edged slightly higher in midday trading on Wednesday as banking and insurance stocks pulled up the benchmark index while miners declined following falls in oil and copper prices.
Investors bet on a sustained period of low interest rates following soft domestic GDP data while better than expected United States manufacturing figures overnight led to expectations of a broader economic recovery.
"There have been bullish rcommendations and that's helped the financials," said Bell Potter Seucrities private client adviser Stuart Smith.
"We've been experiencing paltry volume but it's picked up a little bit. I think we're going to have a strong September."
After slipping at the open, the S&P/ASX 200 index gathered momentum and was up 0.2 percent or 10.99 points at 5669.5 by 0136 GMT.
BHP Billiton fell 1.3 percent or $0.50 to A$36.39. The stock traded ex-dividend but fell less than half its A$1.24 dividend after U.S. manufacturing activity hit a nearly 3-1/2-year high last month and construction spending rebounded in July.
Gold giant Newcrest Mining fell 2.5 percent to A$11.04 after gold prices fell to a two-month low. Rio Tinto was down 0.71 percent at A$62.58.
Insurer QBE, which has major operations in the U.S., led the financials higher, adding 1.29 percent. Investment bank Macquarie Group , which also has a significant U.S. business, was up 1.48 percent.
Healthcare products supplier Australian Pharmaceutical Industries jumped 10.26 percent to 64.5 cents after issuing a profit upgrade.
New Zealand stocks edged higher, with the benchmark NZX-50 index 0.1 percent up at 5226.73.
Of the leading stocks, casino operator Sky City Entertainment Ltd was 0.8 percent higher at NZ$3.83, just shy of a five-week high, and Fisher and Paykel Healthcare Ltd was 1 percent higher at NZ$5.05.
Small and medium-cap stocks supported the overall market, with modest gains for the part-privatised state energy companies, Meridian and Mighty River Power, and telecommunications network operator Chorus.
(Editing by Eric Meijer)