Australian shares flat as rate-cut hopes fade; BHP slumps

(Updates to close) * Central bank's cautious tone dampens rate-cut optimism * BHP shares fall after reports of pause in China purchase * Lithium stocks decline on Chinese regulatory approvals By Roushni Nair and Jasmeen Ara Islam Shaikh Oct 1 (Reuters) – Australian shares finished little changed on Wednesday, as the central bank's cautious tone on inflation dampened expectations for further rate cuts, while miner BHP lost ground after reports China had suspended iron ore shipments over a pricing dispute. The S&P/ASX 200 index closed down 0.05% at 8,844 after falling as much as 0.5% earlier in the session. Markets have pared back bets on near-term easing after the central bank flagged lingering inflation risks at its Tuesday meeting. Traders now see just a 35% chance of a November rate cut and 50% in December, with the total expected easing trimmed to 29 basis points from 47 bps earlier. Mining stocks slipped 0.8% as BHP Group dropped 2.5% to a one-week low, erasing A$5.38 billion ($3.55 billion) in market value. Rio Tinto and Fortescue bucked the trend, rising 0.5% and 1.4%, respectively. China's state iron ore buyer asked steelmakers and traders to halt purchases of BHP's dollar-priced cargoes during annual price talks, Bloomberg reported. BHP is China's third-largest iron ore supplier after Rio Tinto and Brazil's Vale. Analysts at Brokerage Argonaut expect the ban to be temporary, noting that while alternative supply could cover in the short term and even trigger a brief price squeeze, China cannot realistically replace BHP's output. Lithium stocks also declined after reports that Chinese regulators approved reserve filings from two major producers in Yichun, pressuring a sector already grappling with oversupply and weaker-than-expected EV demand. Liontown Resources, Pilbara Minerals , and Mineral Resources lost between 6% and 11%. Financials reversed earlier losses to close up 0.1%, with Commonwealth Bank of Australia and ANZ up 0.1% and 0.2%, respectively. Gold stocks scaled a new high after bullion prices hit a record high as the U.S. government shutdown spurred a safe-haven rush. In New Zealand, the benchmark stock index rose 1.1% to 13,434, hitting its highest in nearly five years. ($1 = 1.5142 Australian dollars) (Reporting by Roushni Nair and Jasmeen Ara Islam Shaikh in Bengaluru; Editing by Subhranshu Sahu)

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