* Commods markets seen overheated, may correct with equities
MANILA, Aug 6 - London copper fell nearly 3 percent on Thursday, after scaling fresh 10-month highs in the previous session, as investors stepped back to reassess the health of the global economy.
Losses in the industrial metal spread to the rest of the complex, with Shanghai copper futures also retreating after a five-day rise, as weak U.S. services data on Wednesday suggested a much hoped-for recovery might be a lot more difficult to achieve than investors had anticipated.
"A lot of people are holding their breath because the gains have been really made off moderately positive fundamentals," said Mark Pervan, a senior commodity analyst at Australia and New Zealand Bank.
"The markets look overheated. I think people are looking for more reasons to sell than to buy, but at the moment there's not a lot of leads."
Global stocks fell on Wednesday after data showed the U.S. services sector shrank at a faster clip than expected in July, raising fears that the pace of recovery from the recession may be slower than hoped. [ID:nN05240699]
Three-month copper on the London Metal Exchange fell $179 to $6,020 a tonne by 0259 GMT, after peaking at $6,235 on Wednesday, its highest since early October.
LME nickel fell $800 to $19,650 a tonne, after hitting $20,450 in the previous session, its loftiest since early September.
Shanghai's benchmark third month copper dropped 640 yuan to 47,450 yuan ($6,947) a tonne. The most-active November contract eased 620 yuan to 47,380 yuan per tonne.
Copper prices have doubled this year after declining more than 50 percent in 2008 but traders said the run-up may have been too fast, too soon.
"My view is things are overpriced. We've started to see the first signs of a pullback in the equity markets which is going to drive down commodities," said ANZ's Pervan.
A 5-10 percent correction in equities could lead to a steeper 15-20 percent fall in commodities, he added.
LME aluminium fell more than 2 percent to $2,025, after touching a nine-month top of $2,115 on Wednesday, while its Shanghai equivalent eked out a small 70-yuan gain to 15,270 yuan.
"Despite its prevailing weak fundamentals, we believe that there is more upside potential for aluminium, with improving demand in China, large volumes of LME inventories tied up in financing deals, a pick up in OECD buying, record low producer inventories and threadbare consumer inventories," Barclays Capital said in a note. Base metals prices at 0259 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 6020.00 -179.00 -2.89 3060.00 96.73 SHFE Cu* 47450.00 -640.00 -1.33 23840.00 99.04 LME Alum 2025.00 -45.00 -2.17 1535.00 31.92 SHFE Alum* 15270.00 70.00 +0.46 11540.00 32.32 COMEX Cu** 275.85 -4.80 -1.71 139.50 97.74 LME Zinc 1880.00 -40.00 -2.08 1208.00 55.63 SHFE Zinc 15075.00 -120.00 -0.79 10120.00 48.96 LME Nickel 19600.00 -850.00 -4.16 11700.00 67.52 LME Lead 1915.00 -30.00 -1.54 999.00 91.69 LME Tin 14925.00 -375.00 -2.45 10700.00 39.49 LME/Shanghai arb^ 654 Dollar/yuan 6.8297 \ 6.8315 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month
