* LME copper up 1 pct, pares last week 2.9 pct slide * Shanghai copper steady; negative arb narrows to 150 yuan * Zinc technicals positive; may target $2,500 (Updates prices, adds details) By Nick Trevethan SINGAPORE, Aug 16 (Reuters) - London copper futures posted a 1.1 percent rise on Monday and Shanghai metal reversed early losses to end flat, rebounding after worries about Japanese and U.S. growth gave way to a more bullish view of supply and demand. London copper futures turned around after falling 1.4 percent in the previous session on soft U.S. economic data, and despite more grim economic news out on Monday. Japan's economic growth slowed sharply in April-June from the previous two quarters, and analysts predict a further slowdown ahead as the yen's rise adds to worries about Japan's key export destinations such as the United States. [ID:nTOE67F001] "In general terms, the data has been patchy. There were some pretty positive signs from the U.S manufacturing side, but the labour market continues to disappoint," said Ben Westmore, commodities economist at National Australia Bank. "Attention will increasingly focus on individual metals' fundamentals. Nickel and copper look strong given the drawdowns in stocks and should China grow around our forecasts of 10 percent next year, those two may see more upside than the rest." A five-month fall in copper stocks MCU-STOCKS, which has seen inventories drop by a quarter to just over 400,000 tonnes, or eight days of global consumption, could help sustain copper above $7,000 a tonne next year, Westmore said. Three-month copper on the London Metal Exchange CMCU3 rose $75.50 to $7,231.50 a tonne by 0701 GMT, after falling 2.9 percent last week, the first weekly drop in four weeks. "The market looks like its going to test $7,000 in the near term, but the weakness is more a function of inactivity than active selling," a trader in Sydney said. For a graphic showing LME prices and volumes, click: here Benchmark third-month Shanghai copper SCFc3 was steady at 57,400 yuan, off an early low of 56,650 yuan. Shanghai copper is trading around 150 yuan lower than its LME equivalent, accounting for China's 17 percent VAT, versus 400 yuan at midday. Aluminium CMAL3 rose half a percent to $2,119.75. Analysts and traders are looking for aluminium stocks to rise this week, with talk in the market that large tonnages could pitch up in exchange warehouses this week. In the middle of May, July and August the cash to three months spreads narrowed sharply MAL0-3 -- currently the spread is around $8 contango, having traded around $30 or more for much of the past two years. Tha short-lived narrowing of spreads in May and July to contangoes of $22 and $16 coincided with inflows of 140,000 tonnes and 52,000 tonnes respectively. For a graphic, click: here "The narrowing of the spread suggests someone needs to get metal -- probably to deliver against a short. Most of the stock remains tied up in financing, which explains even with 4 million tonnes available, the contango has all-but closed," a trader in Singapore said. "We could see substantial physical deliveries in the next few days, if this is a short position rolled over from May." Zinc CMZN3 rose 1.5 percent to $2,077, having touched a three-month high of $2,179 last week. From a technical perspective zinc could be due for a rally, Daryl Guppy of Guppy Traders said. He noted the metal had retreated from resistance near $2,170, while long-term support was located near $1,980. "A fall below this has recent consolidation support near $1,940. Look for rally and retreat activity with an upward bias." The Sydney-based trader said that should zinc break above the 200-day moving average it could take out $2,500, while a break of support around $2,014 would target $1,950. Base metals prices at 0701 GMT Metal Last Change Pct Move End 2009 YTD pct chg LME Cu 7231.50 75.50 +1.06 7375.00 -1.95 SHFE Cu* 57400.00 0.00 +0.00 59900.00 -4.17 LME Alum 2119.75 9.75 +0.46 2230.00 -4.94 SHFE Alum* 15390.00 -25.00 -0.16 17160.00 -10.31 COMEX Cu** 325.15 -3.10 -0.94 332.75 -2.28 LME Zinc 2077.00 30.00 +1.47 2560.00 -18.87 SHFE Zinc 17050.00 65.00 +0.38 21195.00 -19.56 LME Nickel 21500.00 225.00 +1.06 18525.00 16.06 LME Lead 2085.00 28.00 +1.36 2432.00 -14.27 LME Tin 21000.00 250.00 +1.20 16950.00 23.89 LME/Shanghai arb^ 148 Dollar/yuan 6.8017 \ 6.8021 ** 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 (Editing by Himani Sarkar)

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