(Reuters) - London copper rebounded on Wednesday from a six-week low on signs of growth recovery in top consumer China, although gains are likely to be capped as investors wait to hear from the U.S. Federal Reserve which ends a policy meeting later in the day.
China's economy is slowly picking up from its weakest period of growth in three years, a survey of purchasing managers signaled, with new orders and output at their highest in months.
Analysts said the figures from the world's second largest economy had pushed three-month copper on the London Metal Exchange 0.9 percent higher to $7,903 per tonne by 0708 GMT.
The contract touched $7,807.75 the day before, its lowest level since September 7 and below key support at its 200-day exponential moving average.
"London copper is buoyed by today's PMI numbers, but Shanghai copper was mainly held back from further gains by a still-sluggish Chinese copper physical market," said Orient Futures analyst Andy Du.
The most active January copper contract on the Shanghai Futures Exchange edged up 0.4 percent to close at 57,500 yuan ($9,200) per tonne.
In a sign of weak downstream demand for Chinese copper, spot copper prices were trading at a discount of up to 200 yuan to the ShFE front month contract, a bigger spread than the previous session when that discount was only up to 100 yuan.
"Spot prices have been lower than front-month futures in China for some time now, a sign of weak downstream demand here and uncertainty over copper's outlook," said Du.
"For copper futures to stage a convincing rebound, we need to see Chinese consumption lifting."
For now, data suggests that the day's higher ShFE copper prices were largely due to short-covering as ShFE November copper's net daily open interest had fallen by 7,182 lots.
And despite signs pointing to China's economy stabilising, analysts warned the global economy was not out of the woods yet.
"Although there were some positive signals in the most recent data for China, the pace of growth has clearly slowed and uncertainties stemming from global demand and the fallout from previous policy tightening continue to cloud the outlook (for base metals)," National Australia Bank said in a client note.
Investors will be keeping an eye on the Fed's two-day meeting, which ends later in the session, although the U.S. central bank is likely to hold off from taking fresh steps, and will instead review the impact of the significant action it took last month.
Over the next few months, market players will also look out for new policies by Beijing that may affect metals demand, with a leadership change at the Communist Party Congress on November 8.
In industry news, China's copper imports jumped 6.93 percent on the year, largely due to the arrivals of term shipments booked last year rather than a spike in demand.
Base metals prices at 0708 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7903.00 72.00 +0.92 3.99
SHFE CU FUT JAN3 57500 220 +0.38 3.36
LME Alum 1949.00 2.00 +0.10 -3.51
SHFE AL FUT JAN3 15420 30 +0.19 -2.65
HG COPPER DEC2 359.25 2.30 +0.64 4.55
LME Zinc 1866.00 19.00 +1.03 1.14
SHFE ZN FUT JAN3 14880 95 +0.64 0.57
LME Nickel 16375.00 20.00 +0.12 -12.48
LME Lead 2035.00 12.00 +0.59 0.00
SHFE PB FUT 15330 25 +0.16 0.26
LME Tin 20400.00 145.00 +0.72 6.25
LME/Shanghai arb 281
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
($1 = 6.2480 Chinese yuan)
(Reporting by Carrie Ho; Editing by Joseph Radford and Miral Fahmy)
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