Metals prices slipped on Monday on fears of waning demand, but mining giants BHP Billiton and Rio Tinto, engaged in a takeover battle, were among the big gainers on the London stock market.

Copper futures at the London Metal Exchange (LME), often considered a benchmark of the metals market in particular and the real economy in general, were down 3.6 percent from Friday's close at $6,790 per tonne at the end of the official open outcry session.

Some financial markets were briefly spooked when British media reported an explosion in London, though sterling and U.S. stock futures recovered after police said it was only a fire.

Metals markets were not directly affected by the news, but were moved by data from the LME which showed inventories of copper in exchange-registered warehouses rose by almost 3,500 tonnes to 176,200, their highest since April.

Copper prices have fallen around 10 percent so far this month as inventory levels have grown, giving rise to fears that need for the metal is not as great as previously thought.

Imports of copper into China, the world's biggest consumer, fell 5.6 percent between September and October, customs data showed.

Sentiment towards industrial metals in China recently has turned bearish, for the first time in many years, UBS analyst John Reade said.

The Chinese government would have a difficult task to maintain economic growth above 10 percent (year on year) amid bubbles in the stock market and real estate and growing inflationary pressures stemming from high energy and food prices, he said.

Still, mining firms have been among the most active in the mergers and acquisitions market in recent years, betting on strong future demand for metals such as copper, nickel and aluminium, particularly from the industrializing economies of China, India and Russia.

BHP, which wants to buy rival Rio to create a global powerhouse in copper, aluminium, iron ore and other minerals, was up 3.1 percent and its target was up 3.3 percent by 7:51 a.m. EST, while the FTSE was only 0.2 percent higher.

Copper shares have outperformed the copper price by 50 percent and nickel shares outperformed nickel by 90 percent, analyst Jeremy Gray at Credit Suisse said.

The reality is that companies who control resources will always be more valuable than the metal itself.

In other commodities, oil stalled $5 short of the milestone $100 per barrel level it recently approached, while gold fell around 2 percent to its lowest in almost a week.

The recent rise of oil prices ... appears to be the result of the combination of high demand, tight supply conditions, political tensions and market dynamics where price increases trigger the expectation of further price increases, said Lex Hoogduin, Chief Economist at Dutch fund management firm Robeco.

Other industrial metals followed copper down. Aluminium was $36 lower at $2,574 per tonne, while zinc was off $90 at a quoted $2,635/2,640 per tonne.

Lead, one of the outstanding performers in financial markets this year with gains of almost 110 percent, was $80 down at $3,460 per tonne.

Tin was unchanged at $16,950/16,975 per tonne, while steelmaking raw material nickel was up $250 at $34,050 per tonne.

(Reporting by Daniel Magnowski, editing by Peter Blackburn)