Copper rose nearly 3 percent on Wednesday, as another hefty drop in inventories signalled demand could be picking up, while an equities bounce restored some confidence in bruised markets. Copper for three-months delivery MCU3 on the London Metal Exchange rose to $4,296 a tonne in official rings from $4,220 the day before when it hit a three-week low of $4,158. Lifting the demand outlook, copper stocks at LME warehouses fell 8,825 tonnes to a three-month low of 411,450 tonnes, adding to a fall of 5,000 tonnes on Tuesday. "Inventories have been falling for quite a while now and these are big daily declines, so that's helping to provide a support," said Gayle Berry, an analyst at Barclays Capital. The backwardation on copper -- a premium for cash material over three-months delivery -- indicated market tightness influenced by the recent decline in stocks, traders said. "Stocks are going down, denting the market. That's the factor," an LME-based trader said of the backwardation. But he cautioned copper would likely trade sideways for the coming year due to a lack of sturdy consumption on the horizon. The market has so far this year been cheered by a rise in cancelled warrants that has indicated demand could be picking up. This material tagged for delivery stood at 69,400 tonnes from 70,125 tonnes the day before. There were 8,125 tonnes of fresh cancellations on Tuesday, bringing the percentage of cancelled warrants in the system up to 16.9 percent. The ratio of cancelled warrants to total tonnage stands at its highest since early April 2008. Also lifting sentiment, equities rose after data showed the U.S. economy slowly healing. [.EU] A weaker dollar also added support, making metals priced in the U.S. currency more attractive to holders of other currencies. [USD/] Investors will scrutinise U.S. GDP, which fell a more than expected 6.1 percent, and await the Federal Reserve's interest rate verdict due later in the day. ALUMINIUM INVENTORIES CLIMB Aluminium inventories continued their determined ascent, rising 41,350 tonnes to a record 3.8 million tonnes. Aluminium prices MCU3 stood at $1,455 a tonne from $1,436. "What's most concerning is that inventories are still rising sizeably despite the fact that there are big production cutbacks," Berry said. "I don't think we'll see this continued build in inventories go away any time soon. The market is still in a very plentiful surplus," she added. Reflecting lack of demand in an oversupplied market, the world's largest steelmaker ArcelorMittal (ISPA.AS) reported slightly worse-than-expected first-quarter results and forecast a modest pick-up in the second quarter. [ID:nLS823057] Zinc MZN3 was at $1,390 a tonne from $1,341, while battery material lead MPB3 was at $1,308.5 a tonne from $1,292. Tin MSN3 was last quoted at $12,100/12,125 a tonne from $11,900. There is a dominant position controlling more than 90 percent of warrants on LME stocks, which traders said has recently supported prices. Nickel MNI3> rose to $11,075 from $10,920. Stocks of nickel at LME warehouses rose 7,974 tonnes to 114,426 tonnes. The market kept a sharp eye on a swine flu outbreak that has killed up to 159 people in Mexico and raised fears of a global pandemic that could snuff out any nascent economic recovery. "Obviously, this is a problem that no one has a good handle on, so markets will be adrift until the situation gets clearer," said Edward Meir of MF Global in a research note. Metal Prices at 1225 GMT Metal Last Change Pct Move End 2008 Ytd Pct move COMEX Cu 197.90 6.30 +3.29 139.50 41.86 LME Alum 1450.00 14.00 +0.97 1535.00 -5.54 LME Cu 4319.00 99.00 +2.35 3060.00 41.14 LME Lead 1315.00 23.00 +1.78 999.00 31.63 LME Nickel 11100.00 180.00 +1.65 11700.00 -5.13 LME Tin 12100.00 200.00 +1.68 10700.00 13.08 LME Zinc 1384.00 43.00 +3.21 1208.00 14.57 SHFE Alu 12460.00 150.00 +1.22 11540.00 7.97 SHFE Cu* 35180.00 720.00 +2.09 23840.00 47.57 SHFE Zin 12235.00 320.00 +2.69 10120.00 20.90 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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