* LME copper recovers from early losses as dollar extends fall
* Shanghai ends at near day's high, stockpiles drop more than forecast (Adds data on Shanghai stockpiles)
By Manolo Serapio Jr.
MANILA, June 26 (Reuters) - Shanghai copper rose for a fourth day running to hit a two-week top on Friday, catching up with London's advance the previous day, ahead of an anticipated decline in weekly stockpiles.
After the Shanghai market closed, data showed copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 12,448 tonnes, or 18 percent, from the previous week.
The market was only looking at a decline of up to 11,000 tonnes in copper stocks after a 7,889 tonne increase last week.
"Right now, we are seeing 'buy Shanghai, sell London' because of some arbitrage-related selling," said a Shanghai-based trader.
Shanghai copper chalked up a more than 3 percent increase for the week while the LME metal is headed towards an over 2 percent rise, but analysts say gains look fragile given a still unclear outlook for global demand.
"The market is pretty volatile due to uncertainty on the economy. The leading indicators appear to be very strong but we haven't seen a real recovery on the real economy yet," said Bonnie Liu, analyst at Macquarie.
"There's a lot of confusion in terms of reading the data and that's the reason why the equity and the commodities markets go up and down over the past 3-4 weeks."
Shanghai third month copper closed up 1,080 yuan to 40,390 ($5,914) yuan a tonne, near the day's peak of 40,410 yuan, and its best closing level since June 12.
Copper for three-month delivery on the London Metal Exchange was flat at $5,130 a tonne by 0702 GMT, after falling as low as $5,062 earlier.
LME copper marked its third straight day of gains on Thursday, on creeping optimism about the fate of the global economy with the release of some encouraging U.S. data earlier this week.
A better economic outlook from the OECD and data showing U.S. durable goods orders rose unexpectedly on Wednesday helped push up copper prices, only to give up some of those gains as caution set in when the Federal Reserve said the economy would remain weak for a time.
On Thursday, there were fresh signs of weakness in the U.S. jobs market, eclipsing figures showing that the recession-hit economy shrank slightly less in the first quarter than previously thought.
The slower demand season in China in the next two months would be another factor that will weigh on commodity prices ahead, said Liu.
"We do start to hear about stocks (of metals) building up in the domestic market, and that's like a threat to commodity prices," she said.
In South Korea, Asia's third-largest buyer of base metals, the government has increased its 2009 reserve stockpiling plan on six major metals by 6.2 percent to 199,800 tonnes because it expects prices to rebound sharply next year. Base metals prices at 0702 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 5130.00 0.00 +0.00 3060.00 67.65 SHFE Cu* 40390.00 1080.00 +2.75 23840.00 69.42 LME Alum 1680.00 -4.00 -0.24 1535.00 9.45 SHFE Alum* 13525.00 110.00 +0.82 11540.00 17.20 COMEX Cu** 230.00 0.00 +0.00 139.50 64.87 LME Zinc 1615.00 -28.00 -1.70 1208.00 33.69 SHFE Zinc 13545.00 115.00 +0.86 10120.00 33.84 LME Nickel 15750.00 125.00 +0.80 11700.00 34.62 LME Lead 1730.00 -8.00 -0.46 999.00 73.17 LME Tin 14825.00 0.00 +0.00 10700.00 38.55 LME/Shanghai arb^ 636 Dollar/yuan 6.8352 \ 6.8355 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month (Editing by Ben Tan)
