SHANGHAI (Reuters) - Copper climbed on Thursday and Shanghai prices hit a one-week high as a mild inflation number and disappointing factory output from top metals consumer China raised hopes for further policy easing to boost growth in the world's second-largest economy. Still, gains were capped by a lackluster Chinese physical copper market, crimped by fears over the global economy and lower demand during the current seasonal lull. In July, annual growth in China's factory output slowed to the weakest level in more than three years, while annual consumer inflation fell to a 30-month low of 1.8 percent. While some traders said the gloomy numbers were within their expectations, others said they believed them to be dismal enough to trigger policy moves by Beijing to stem slowing growth. "I thought the China inflation numbers were terrible, but many people were hopeful these will lead to more stimulus measures and therefore covered their short positions," said a Shanghai-based trader with an international firm. Although three-month copper on the London Metal Exchange had inched up 0.2 percent to $7,561 per metric ton by 3:09 a.m. EDT, the trader said overall sentiment remained cautious, citing thinner-than-usual trading volumes as evidence. Short-covering was also evident in the most active November copper contract on the Shanghai Futures Exchange, with net open interest for the contract falling 13,966 lots from Wednesday. Shanghai prices rose 0.8 percent to close at 55,160 yuan ($8,700) per metric ton, rolling back from a session peak of 55,220 yuan, the highest since July 30. "Gains were capped by a sluggish Chinese physical market, which is weighed down by fragile global macroeconomics and the fact that this is the lull season for copper demand," said a Qingdao-based metals buyer. Investors are expected to take further trading cues from U.S. trade and jobs data later in the day. In Europe, a second fall in German imports in three months gave investors more cause for caution as it fuelled fears that the domestic mood in the euro zone's strongest economy may be weakening under the pressure of the bloc's debt crisis. ALUMINIUM Demand and trading volumes for aluminum were low in the Shanghai market as Chinese traders shied away from the metal as it is already trading close to its marginal cost. "Shanghai aluminum prices are not moving much as there seems very little room to rise or fall since they are near smelting costs," said a Shanghai-based trader. The most-active November contract, which has fallen about 7 percent from the year's high of 16,565 yuan in January, inched up 0.6 percent to close the day at 15,470 yuan per metric ton. The lack of demand and interest has also pushed Shanghai aluminum physical premiums down about $10 to $220 in the last week, despite higher premiums elsewhere in Asia, Commonwealth Bank of Australia said in a note on Thursday. For nickel, Macquarie bank said in a recent note that it expected the metal's outlook to improve after a heavy sell-off in the past few months as Chinese nickel pig iron producers had made "significant cuts" to production because of low prices. LME nickel, which was trading at $15,607 per tonne, started dipping below its marginal cost of $16,000 on July 12. (Editing by Clarence Fernandez and Chris Lewis) (c) Copyright Thomson Reuters 2012. Check for restrictions at: http://about.reuters.com/fulllegal.asp

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