(Reuters) - London copper rallied to a one-month high on Thursday after the U.S. Federal Reserve signaled that further stimulus might be on the agenda, and after shrinking factory growth numbers out of top metals consumer China also raised prospects for further easing there. Minutes from the U.S. central bank's latest meeting suggested the Fed was likely to deliver another round of monetary stimulus fairly soon unless the economy improved considerably. The news weighed on the dollar and helped send copper prices to one-month highs for a third straight day. Gains were initially tempered after data from China showed factory activity in August shrank at the fastest pace in nine months as new export orders slumped and inventories rose, a signal that a persistent slowdown in economic growth has extended deeper into the third quarter. But the traders said the poor figures ultimately added fuel to expectations for further easing by the world's second-biggest economy. "Certainly the FOMC minutes were taken positively by the market on signs that the Fed meeting has tipped the scales further in favor of stimulus," said Nick Trevethan, senior commodity strategist at ANZ in Singapore. "Following the relatively weak HSBC PMI data, market expectations of further easing measures for China have also increased -- but it's important to note that the HSBC number tends to be fairly volatile." Three-month copper on the London Metal Exchange traded at $7,681 per tonne at 0704 GMT, up 1 percent and having earlier hit $7,687.50, which was the highest since July 20. Prices edged out of negative territory on Thursday and are now close to levels seen at the start of the year. The most-traded December copper contract on the Shanghai Futures Exchange advanced 1.17 percent to close at 55,980 yuan ($8,800) per tonne. China is the world's biggest user of copper, accounting for 40 percent of refined demand last year. The HSBC Flash China manufacturing purchasing managers index (PMI) fell to 47.8 in August, the lowest level since November, from 49.5 in July. "Copper is up on further shortcovering and, yes, there is an increased chance of RRR especially after S&P said China could benefit from further easing," a Singapore-based trader said. Standard & Poor's Ratings Agency said on Wednesday that China could afford another big stimulus if conditions sharply deteriorated. China's central bank took fresh steps to lubricate cash flow on Thursday, completing its largest weekly injection of funds into China's banking system in seven months, following the weakest month for lending in a year. Traders and analysts saw the move as a substitute for a cut in the required reserve ratio (RRR) for banks. "Copper buyers may be looking at Chinese repo operations as a stealthy reflation measure, but the headline watchers out there are still looking for a big announcement with requisite fanfare," Trevethan added. In other markets that may affect metals, Asian shares rose and the euro hit a seven-week high on Thursday on the Fed minutes, while uncertainty continued over progress in Europe's debt crisis including action by the European Central Bank. Germany's Angela Merkel and Francois Hollande of France are expected to tell Greek Prime Minister Antonis Samaras this week that they can give him little leeway on easing the terms of his country's bailout agreement. TIN SHORTS Near-dated tin prices have climbed on worries over a supply shortfall after Indonesian producers said this month they would halt exports because of low prices. Cash tin on the LME was evaluated at a $9 premium to three-month prices on Wednesday. "With spec players still short, recent production closures and a large warrant holder ... we think tin could still run higher in the short term. The next big resistance point in the charts for tin is the 100-day moving average at $19,786," RBC Capital said in a note.

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