(Recasts, add comments, details, pvs Singapore) * Drop comes after hitting 7-week top on Tuesday * ECB expected to cut interest rate by 25 basis point * U.S. Fed might also rely on monetary stimulus By Silvia Antonioli LONDON, July 4 (Reuters) - Copper fell on Wednesday from a 7-week high hit the previous session, as the dollar rose and investors locked in recent steep gains ahead of expected stimulus from central banks to revive a faltering global economy that has dented demand for metals. Three-month copper on the London Metal Exchange traded at $7,705 in official rings, down more than 1 percent from a last bid at $7,818 on Tuesday, when it hit a 7-week high of $7,823. Aside from a brief pause on Monday when prices eased, shorts have continued running for cover after a surprise agreement from euro-zone leaders last Friday and ahead of the European Central Bank (ECB) meeting on Thursday when economists believe the bank will cut interest rates in a bid to boost the region's ailing economy. Supporting these expectations, business surveys on Wednesday showed the euro zone's private sector downturn eased only slightly in June as companies slashed prices. "Today we see a reaction to the feeling that things have gone a bit too far in the last few days. It was such a big rally and so quickly that the market needs to settle down a bit," Ivan Szpakowski, an analyst at Credit Suisse, said. "A 25 basis point interest rate cut in the EU is already priced in at this point; a 50 points cut would prompt a rally but if the ECB doesn't cut we are going to see a lot of red. The really terrible ISM number raised expectations the Fed will make a move too." U.S. manufacturing shrank in June for the first time in nearly three years, adding to signs of a recovery slowdown but raising hopes for more policy easing by the Federal Reserve. A weaker euro against the U.S. dollar weighed on metals, too. The euro slipped against the dollar on grim economic data. A stronger U.S. unit makes dollar-priced commodity such as metals costlier for holders of other currencies. MONETARY EASING? Investors are now waiting for key U.S. non-farm payrolls data on Friday for fresh trading cues: a disappointing number would further increase expectations of monetary easing in the United States. Copper was still up about 5 percent from Friday, reaching a similar level to the beginning of this year though technical charts indicate LME copper is biased to drop to $7,701 per tonne and Shanghai copper may retrace to 55,620 yuan per tonne, according to Reuters market analyst Wang Tao. In industry news, Indonesia has awarded mineral export permits to 22 firms since it introduced curbs on such shipments in May, a trade ministry official said on Tuesday, after the restrictions triggered panic buying in minerals including nickel and bauxite by Japanese and Chinese customers. Nickel traded at $17,000 from $17,290 while aluminum was exchange hands at $1,965.50 from $1,983. "Aluminium has been driven up, among other things, by sharply rising oil prices with which it shows a high long-term correlation. That said, the latest increase in price makes it less likely that the production cuts urgently needed to reduce the high supply surpluses will come anytime soon," Commerzbank said in a research note. "The still high physical premium paid by consumers on the LME price, especially in Europe and Asia, will go some way to easing the situation for aluminium smelters." Zinc traded at $1,899 from $1,906, lead at $1,905 from $1,939 and tin, untraded in rings, was bid at $19,075 from $1,939. Metal Prices at 1211 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2011 Ytd Pct move COMEX Cu 350.60 -3.20 -0.90 344.75 1.70 LME Alum 1961.00 -22.00 -1.11 2020.00 -2.92 LME Cu 7708.00 83.00 +1.09 7600.00 1.42 LME Lead 1906.50 -32.50 -1.68 2034.00 -6.27 LME Nickel 17023.00 -267.00 -1.54 18650.00 -8.72 LME Tin 19070.00 -180.00 -0.94 19200.00 -0.68 LME Zinc 1896.50 -9.50 -0.50 1845.00 2.79 SHFE Alu 15670.00 130.00 +0.84 15845.00 -1.10 SHFE Cu* 56080.00 -140.00 -0.25 55360.00 1.30 SHFE Zin 14800.00 -20.00 -0.13 14795.00 0.03 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Carrie Ho in SHANGHAI; editing by Jason Neely)

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