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RTRS: Copper bounces with equities, but upside limited
 
CHINA - * Fed liquidity injection helps boost confidence
* Hefty rise in LME stocks; copper stocks jump 9,600 tonnes

* China absent from copper market

(Releads, adds comment/detail)

By Michael Taylor and Pratima Desai

LONDON, Oct 7 (Reuters) - Copper bounced on Tuesday along with equity markets, but economic fears, rising inventories and poor demand prospects are expected to cap prices.

Three-month copper on the London Metal Exchange was trading at $5,610 a tonne at 1511 GMT versus $5,560 a tonne on Monday, when it hit a 20-month low of $5,465 a tonne.

European shares rose after the U.S. Federal Reserve announced the creation of a special-purpose facility to begin buying commercial paper in yet another emergency move aimed at calming financial markets.

"There's just a massive liquidity injection globally, everybody is trying to pump money into the financial system to try to stabilise it," said Edward Meir, analyst at MF Global.

"Commodities are benefitting from that, but the backdrop looks pretty bleak."

Stocks of copper in LME registered warehouses rose by 9,600 tonnes to 208,350 tonnes -- their highest since February 2007, with between 80-90 percent of them held by one entity.

"Clearly, there are ongoing concerns about how deep and prolonged the downturn is going to be and concerns about the impact it's going to have on demand across the board," said Adam Rowley, analyst at Macquarie Bank.

Lack of demand in China, the world's largest consumer of copper, using about 25 percent of total global production, has also sapped confidence.

"China, returning from a week-long holiday yesterday, showed no inclination to pick up "cheap" LME copper," said UBS (nyse: UBS - news - people ) in a note. "If China is shunning copper at these prices, there is no signal for the shorts (bets on lower prices) to cover."

CONSUMPTION FALLING

Aluminium was at $2,285 tonne from $2,255 on Monday when it hit $2,235, its lowest level since early 2006.

Stocks of the metal in LME warehouse at more than 1.38 million are at their highest since February 2004.

"We continue to see weakness in U.S. consumption. European consumption is faltering rapidly and is expected to get worse," Barclays (nyse: BCS - news - people ) Capital said in a note.

"Worryingly Chinese consumption is also showing signs of slowing and we now believe it's increasingly unlikely that consumers will come back and restock through (the second half of 2008) after aggressive destocking in (the first half)."

China is the world's largest producer and consumer of aluminium used in transport, packaging and power.

Stainless steel raw material nickel was trading at $14,275 from $14,300 on Monday.

Lead was at $1,656 per tonne from Monday's last bid at $1,630, tin was at $16,300 versus $16,200 and zinc at $1,559 from $1,549.

Looking ahead, metals markets are waiting for U.S. Federal Reserve Chairman Ben Bernanke to speak at 1715 GMT.

Metal Prices at 1514 GMT Metal Last Change Percent Move End 2007 Ytd Percent

move LME Cu 5609.00 49.00 +0.88 6670.00 -15.91 SHFE Cu* 48640.00 -2570.00 -5.02 56880.00 -14.49 LME Alum 2282.00 27.00 +1.20 2403.00 -5.04 SHFE Alu* 14470.00 -435.00 -2.92 18180.00 -20.41 COMEX Cu** 257.25 6.85 +2.74 303.05 -15.11 LME Zinc 1554.00 -46.00 -2.88 2370.00 -34.43 SHFE Zinc* 12845.00 -825.00 -6.04 18950.00 -32.22 LME Nick 14150.00 -150.00 -1.05 26350.00 -46.30 LME Lead 1648.00 -72.00 -4.19 2550.00 -35.37 LME Tin 16250.00 -485.00 -2.90 16400.00 -0.91 ** 1st contract month for COMEX copper * 3rd contact month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting Humeyra Pamuk; editing by Peter Blackburn)

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