MANILA (Reuters) - London copper fell more than 1 percent on Thursday, giving up part of the previous day's 5 percent gain, after the Federal Reserve said the U.S. economy will remain weak for a time, rekindling demand worries. But copper prices in Shanghai chased the LME rally and edged higher for a third day running. After keeping interest rates near zero percent, the Federal Reserve said on Wednesday it saw signs that the deep U.S. recession was easing but acknowledged that economic activity will remain weak for a time. The Fed's statement lent support to commodity markets but largely confirmed what many investors knew all along, said Jonathan Barratt, managing director at Commodity Broking Services. "The Fed just reiterated their support for the U.S. economy, (and) that we're not out of the woods yet but we are getting close," said Barratt. Benchmark Shanghai third-month copper rose 350 yuan to 39,410 yuan a tonne by 0338 GMT, after closing up 720 yuan on Wednesday. Copper for delivery in three months on the London Metal Exchange fell $65 to $4,990 a tonne, off an earlier low of $4,935. London copper surged $250 on Wednesday to settle at $5,055, helped by a better economic forecast from the Organization for Economic Copperation and Development and data showing U.S. durable goods orders unexpectedly rose in May. LME copper shortly trimmed those gains in after-hours trading following the Fed statement, which some analysts say will not have too much impact on base metals in the short term. "A lot of the recovery over the past few months has been based on positive macroeconomic data and talk of greenshoots and right now, I think the market is very much focused on the fact that Chinese imports are going to fall back," said analyst Yingxi Yu at Barclays Capital. "That's going to be the key factor dominating sentiment over the next few months." There has been talk that Chinese stockpiling may ease in coming months which could slow imports after hitting record levels until May. Macquarie has said there is talk that China's State Reserves Bureau has become a seller, after building reserves this year, and has probably unloaded around 50,000 tonnes and could sell another 100,000 tonnes in coming weeks. But Commodity Broking's Barratt believes China will continue buying metals for reserves, to feed an economy likely to remain strong. "The copper market is relatively balanced. It only makes sense that they will continue to buy, although you don't buy in a rising market, you let the market relax a little bit before committing again," he said.

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