* Copper down 0.6 pct on LME, up 0.3 pct on ShFE
* Bernanke's speech eyed for signals on U.S. economy
* Copper arbitrage window shuts, drags LME copper
down-trader
* U.S. Gross Domestic Product, Q2-Prel; 1230 GMT
(Updates prices, adds quotes and details)
By Carrie Ho
SHANGHAI, Aug 26 (Reuters) - LME copper fell on Friday,
after surging to its highest in almost three weeks in the
previous session, as investors remained cautious ahead of a
speech by Federal Reserve Chairman later in the day.
The base metals market is expected to be volatile during the
day with many investors betting against the Fed unveiling new
quantitative easing (QE) measures, while some looked forward to
it offering positive signals about the faltering U.S. economy.
Three-month copper on the London Metal Exchange fell
0.6 percent to $8,974.50 a tonne by 0350 GMT, after closing 1.7
percent higher in the last session, when it hit $9,075 -- the
highest since Aug. 8.
"The tempting conclusion is to suggest a sell-off would
ensue (if Bernanke does not unveil extra stimulus) particularly
from the equity side," said MF Global senior commodity analyst
Edward Meir on copper in a note on Thursday.
"But the markets could easily rally as well, as investors
may interpret a more measured approach as a signal that the Fed
believes the economy is capable of recovering on its own -- and
without additional Fed tinkering."
Fed Chairman Ben Bernanke's speech at an annual central bank
conference in Jackson Hole, Wyoming, the venue where he unveiled
QE2 last year, is scheduled for 1400 GMT.
Traders said the closing of the copper arbitrage window also
led to some selling on the LME.
"In early trading today, we saw lots of investors who had
taken advantage of the arbitrage window a while ago selling on
LME to close out their long positions. Later, LME copper was
dragged down by ShFE copper paring gains," said one
Shanghai-based trader.
LME copper is now trading at a premium of 118 yuan to
Shanghai copper, taking into account China's 17 percent
VAT,reversing an earlier trend where it was trading at a
discount of more than 200 yuan.
The most-active November copper contract on the Shanghai
Futures Exchange SCFc3 rose 0.3 percent to 66,980 yuan per
tonne, after hitting a high of 67,350 yuan earlier in the
session. It rose 0.5 percent on Thursday.
Market players say that uncertainties ahead of Bernanke's
speech and continued worries about a global economic slowdown
may have nudged down the contract's gains.
Striking workers at Verizon Communications pushed up new
U.S. jobless claims last week, but there was little evidence the
recent stock market turmoil had spooked businesses enough for
them to cut workers.
Europeans are cutting spending and feeling gloomier about
the future as fears of a double-dip recession rise and stock
markets wobble.
Former German Chancellor Helmut Kohl, a driving force of
European integration, has launched an unusual public attack on
Angela Merkel's foreign policy, adding his voice to a chorus of
criticism of her leadership from fellow conservatives.
In industry news, Japan's output of rolled copper product
dropped 4.1 percent in July from a year earlier, its second
consecutive year-on-year fall, due to sluggish demand from auto
and chip makers, an industry association said.
Jiangxi Copper , China's biggest copper
producer and fabricator, reported a 96 percent jump in its first
half net profit.
Base metals prices at 0350 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 8974.50 -55.50 -0.61 -6.52
SHFE CU FUT NOV1 66980 190 +0.28 -6.78
LME Alum 2368.00 7.00 +0.30 -4.13
SHFE AL FUT NOV1 17345 25 +0.14 3.00
HG COPPER SEP1 405.85 -2.20 -0.50 -8.58
LME Zinc 2204.00 -24.00 -1.08 -10.19
SHFE ZN FUT NOV1 16980 -105 -0.61 -12.81
LME Nickel 21011.00 136.00 +0.65 -15.11
LME Lead 2377.00 -24.00 -1.00 -6.78
SHFE PB FUT 16740 -40 -0.24 -8.77
LME Tin 23500.00 100.00 +0.43 -12.64
LME/Shanghai arb 118
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month
(Reporting by Carrie Ho; Editing by Himani Sarkar)
