Copper prices climbed a three-week high on Tuesday, lifted by an expansion in manufacturing activity in the United States and China which boosted hopes that demand for industrial metals will remain healthy.

Three-month copper on the London Metal Exchange (LME) rose to $7,708.50 a tonne at 3:49 p.m., up from the previous session's close of $7,600 a tonne. It earlier hit a three-week intraday high at $7,730.

The pace of growth in the U.S. manufacturing sector accelerated in December, its best month since June, according to the Institute of Supply Management (ISM).

Earlier in the session, metals prices were supported by data showing China's official purchasing managers' index (PMI) rose to 50.3 in December from 49 in November, indicating a slight expansion in business activity in the factory sector.

The year has started on a better footing than many in the market had feared so it is not surprising to see commodities up across the board on the back of supportive equity markets, a weak dollar and lower risk aversion, said Eugen Weinberg, head of commodity research at Commerzbank.

The upbeat data lifted European shares and nudged the euro higher against the dollar, helping cement gains for metals prices. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.

But the longer-term market outlook for the rest of the year remains shaky, with all eyes on policymakers' efforts to resolve the euro zone debt crisis.

It will depend on whether the debt crisis calms down or whether investors remains jittery, (which) would be negative for metals, said Peter Fertig, consultant at Quantitative Commodity Research.

The metal, used in power and construction, posted its first annual decline in three years in 2011 when it lost a fifth of its value on fears related to the euro zone debt crisis and the global economic slowdown.


Asset correlations with the euro:

Asset returns in 2011:

Debt crisis in graphics:



On the technical front, analysts reckon the metal's downward trend was still intact and expected to see further weakness ahead.

The price action of the last few months has been defined by a new downtrend and although this was breached in December the outlook is still unclear, Bill McNamara, technical analyst at Charles Stanley said in a note.

Rallies up to and through $8,000 have failed twice and we would need to see a decisive break above $8,000 to suggest that the bull case is back on.

Soldering metal tin rose to $19,625 a tonne from the previous session's close of $19,200, having earlier hit a 3-week high at $19,495. Zinc, used in galvanizing, rose to $1,863 from $1,845.

Battery material lead traded at $2,024.25 from $2,034, having earlier hit a near three week high at $2,055.75, while aluminium rose to $2,044.75 from $2,020. Nickel traded at $18,488 from $18,650.

Workers headed back to Freeport McMoRan Copper & Gold Inc's mine in Indonesia on Tuesday at the end of a three-month strike that shook labour relations in southeast Asia's biggest economy, according to a mine worker who spoke to Reuters.

Rio Tinto Alcan will shut down about a third of the production at its 438,000-tonne Alma aluminium smelter in the Canadian province of Quebec after locking out hundreds of unionized workers in a contract dispute.

(editing by William Hardy)