MARKETS-METALS (UPDATE 3) * Chinese arbitrage buying boosts prices * Corporate and macro data offered mixed signals (Recasts, adds comments/details, changes dateline from SINGAPORE) By Michael Taylor LONDON, July 21 (Reuters) - Copper hit a near three-week high on Wednesday as strong physical and Chinese buying coupled with falling inventories supported prices, but gains were capped by the uncertain outlook for economic growth. By 0951 GMT, copper for three-month delivery on the London Metal Exchange traded at $6,761 a tonne from $6,637 at the close on Tuesday and compared with a session high at $6,795. On Tuesday, new U.S. home construction hit its lowest level in eight months in June, further evidence the economy lost momentum in the second quarter. "Everything pointed towards some weakness but we got the opposite," said Daniel Brebner, analyst at Deutsche Bank. "The key thing is the Chinese buying interest remains decent -- so there is arbitrage (interest)." Shanghai's benchmark third-month copper gained 0.6 percent to close at 53,350 yuan a tonne. The contract peaked at 53,600 yuan, also its highest since July 15. Used in power and construction, copper prices rose 140 percent last year but are down about 8 percent in 2010. "We're seeing more activity from commercials -- fabricators, manufacturers, consumers," Brebner said. "The physical market is taking advantage and buying, and physical markets remain tight." On Wednesday, the euro hovered near a 10-week high against the dollar, supported by strong U.S. corporate earnings that also boosted global shares. A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies. Keeping price gains in check was data showing China's imports of refined copper falling for a third straight month in June. The figures followed data last week showing production of refined copper in China, the world's biggest consumer, rose 6 percent to a record 422,000 tonnes in June as smelters lifted output to meet targets. Looking ahead, U.S. Federal Reserve Chairman Ben Bernanke is due to speak about the economy and monetary policy before the Senate Banking Committee at 1800 GMT. Investors also awaited corporate results from financial firms Morgan Stanley and Wells Fargo later. "Key issues are, for the most part, decent earnings numbers coming through and macro data that looks quite poor," said Brebner. "You've got this tussle between positive and negative, and as a consequence I see these things trade range bound." ZINC FORECASTS CUT -POLL In the mid-year Reuters metals price poll, analysts cut their forecasts for zinc prices for 2010 from a similar survey in January. The survey of 55 metal analysts taken over the last four weeks showed copper was expected to average $6,878 a tonne this year from $7,077 a tonne in the January poll. For aluminium the number was an unchanged $2,094 a tonne. Aluminium traded at $1,993.50 versus $1,971. LME stocks for the metal, used in transport and packaging, climbed 2,925 tonnes to 4.42 million tonnes but are down from record levels above 4.64 million tonnes touched in late January. Copper stocks fell 1,975 tonnes to 417,625 tonnes, down from near seven-year highs at 555,075 tonnes hit in mid-February. "The wider ranges continue to hold on the LME, with base metals still trading off equities and broader market sentiment," said VTB Capital in a note. "However, the correlation with the stock markets has eased somewhat for metals like copper and aluminium, where fundamentals held firm, as also evident from persistent stock draws across the board," it added. Zinc traded at $1,887 a tonne from $1,875 and tin was at $18,325 from $18,240. Steel making ingredient nickel traded at $19,270 from $19,125 while battery material lead was at $1,853.75 from $1,837. Metal Prices at 0957 GMT Metal Last Change Percent Move End 2009 Ytd Percent move COMEX Cu 305.00 5.15 +1.72 334.65 -8.86 LME Alum 1988.00 17.00 +0.86 2230.00 -10.85 LME Cu 6762.00 125.00 +1.88 7375.00 -8.31 LME Lead 1847.00 10.00 +0.54 2432.00 -24.05 LME Nickel 19175.00 50.00 +0.26 18525.00 3.51 LME Tin 18200.00 -40.00 -0.22 16950.00 7.37 LME Zinc 1882.00 7.00 +0.37 2560.00 -26.48 SHFE Alu 15015.00 -15.00 -0.10 17160.00 -12.50 SHFE Cu* 53350.00 290.00 +0.55 59900.00 -10.93 SHFE Zin 15450.00 0.00 +0.00 21195.00 -27.11 ** Benchmark 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 Alison Birrane)

Source