MARKETS-METALS (UPDATE 5)
* ECB euro zone govt bond buying supports
* Demand on the road to stronger recovery
* Copper, aluminium LME stocks fall further
(Updates prices, adds comment)
By Pratima Desai and Michael Taylor
LONDON, May 10 (Reuters) - Industrial metals bounced on Monday, taking heart from a $1 trillion emergency package to stabilise markets and resolve the Greek debt crisis that has threatened to sink the euro.
The deal, hammered out by European Union finance ministers, central bankers and the International Monetary Fund in weekend talks, was the largest in more than two years since G20 leaders pumped money into economies after Lehman Brothers' collapse.
At 1406 GMT, copper on the London Metal Exchange traded at $7,130.75 a tonne from $6,940 on Friday.
The metal, used in power and construction, last week fell 6.5 percent, hitting a trough of $6,632.75 a tonne, its lowest since Feb. 10.
"The pullback that we saw was excessive, given the underlying improvement in fundamentals that is going on," Gayle Berry, an analyst at Barclays Capital, said.
"This rebound is in line with the recovery you're seeing in those fundamentals," she added. "Inventory trends are turning more positive for most metals ... we saw the physical markets really pick-up since the price pullback."
Also important was news that the European Central Bank will buy euro zone government bonds to support fractured markets, abandoning firm resistance to full-scale asset purchases in light of Greece's debt crisis.
"There is a feeling that however much money you throw at Greece, they might still think it's in their best interests to partially default or default. This (ECB news) makes it seem far less likely," Robin Bhar, an analayst at Credit Agricole said.
ATTRACTIVE Underpinning the gains on Monday was also a sense that the global economy and demand for industrial metals are on the road to a stronger recovery.
Manufacturing and jobs data from the United States, the world's largest economy, have helped boost sentiment.
"The contrast between increasingly supportive macro fundamentals against escalating policy concerns has perhaps never been as glaring as in the past several days and weeks," said Goldman Sachs in a note.
"We would generally view the recent sell-off as a buying opportunity for ... with copper in particular looking particularly attractive post the recent severe sell-off."
Many fear demand from China, the world's largest consumer of industrial metals, will tumble as the country's government tightens policy to rein in price pressures.
Others think policy will not be tightened to the extent that it significantly hits demand. They are not worried about a 4.4 percent fall in April Chinese copper imports, after a 41.6 percent gain in March.
"They are down only marginally ... domestic prices do not favour imports," Bhar said.
Positive sentiment was further reinforced by the Chinese central bank which said it would maintain appropriately loose monetary policy.
Another supporting factor is falling stocks of metal in LME warehouses.
Copper stocks have fallen 64,200 tonnes since the middle of February to 490,875, while aluminium stocks are down 134,525 to 4.5 million tonnes since a record high above 4.64 million tonnes hit on January 21.
Aluminium traded at $2,140.50 a tonne from $2,072.5, zinc at $2,141 from $2,091, lead at $2,108 from $2,042, tin at $18,020 from $17,600 and nickel at $23,230 from $22,550 on Friday.
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Metal Prices at 1408 GMT Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 322.00 8.90 +2.84 332.75 -3.23 LME Alum 2132.00 59.50 +2.87 2230.00 -4.39 LME Cu 7112.00 172.00 +2.48 7375.00 -3.57 LME Lead 2104.00 62.00 +3.04 2432.00 -13.49 LME Nickel 23125.00 575.00 +2.55 18525.00 24.83 LME Tin 17850.00 250.00 +1.42 16950.00 5.31 LME Zinc 2135.00 44.00 +2.10 2560.00 -16.60 SHFE Alu 15720.00 245.00 +1.58 17160.00 -8.39 SHFE Cu* 56620.00 2120.00 +3.89 59900.00 -5.48 SHFE Zin 16980.00 325.00 +1.95 21195.00 -19.89 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Reporting by Michael Taylor; editing by Sue Thomas)
