* Official, HSBC China PMI fall more than expected in June
* Equities boost ShFE copper, which pares early session
losses
* Coming up: U.S. ISM manufacturing data, June; 1400 GMT
(Updates prices, adds quotes and details)
By Carrie Ho
SHANGHAI, July 1 (Reuters) - LME copper fell on Friday after
data showed that China's factory output growth slowed more than
expected in June, renewing speculation over whether the
country's efforts to slow growth to tame inflation will end in a
soft or hard landing.
Three-month copper on the London Metal Exchange fell
0.1 percent to $9,418 a tonne by 0810 GMT, after rising nearly
1.2 percent in the last session on the passing of a five-year
austerity plan by the Greek parliament.
But LME copper is on track for a weekly gain of more than
4.1 percent.
China's official Purchasing Managers' Index (PMI) for June
fell to 50.9 from 52 in May, less than the 51.3 expected by the
market.
HSBC's China PMI for June also dipped, from 51.6 to 50.1,
the lowest in 11 months.
This final reading was slightly grimmer than the flash HSBC
PMI published on June 23, which indicated the factory sector was
still expanding but close to stalling.
"The lower-than-expected China PMI is definitely one of the
factors that has caused some players to pare back bullish bets
on copper especially after the huge rally over the past three
days," said Phillip Futures analyst Ong Yiling.
But the bearish effect waned on Shanghai copper towards the
end of Asian trading hours.
The most-active September copper contract on the Shanghai
Futures Exchange fell to a session low of 69,530 yuan
earlier in the session before paring losses and edging up 0.03
percent to close at 69,880 yuan.
Sentiment was partly lifted by Asian equities which hit
their highest level in nearly a month on Friday, backed by
receding fears of a default by Greece and encouraging data from
the U.S. overnight, while the euro touched a fresh three-week
high.
Traders also reported that Chinese investors were doing
arbitrage trading, selling LME copper all day and buying
Shanghai copper during the later half of the day.
"The Chinese were selling on the LME today but the Western
investors were buying them up," said a Shanghai-based trader.
While long investors helped LME copper pare losses during
late Asian trading hours, they failed to push it into positive
territory.
One trader said LME copper was also bogged down by the
upcoming LME option declaration day on the first Wednesday of
each month.
"Right now, people are spreading out their options. Those
who have sold put options may be covering up by selling futures.
I would think that they got a bit nervous seeing the China PMI
figures and they want to square up their positions," said
managing director of Gold Matrix Resources Pinaki Rath.
A put option gives the buyer of the option the right, but
not the obligation, to sell a forward commodities contract at a
fixed price on or before a certain date.
Another trader drew attention to the very large number of
call options, or options to buy, at $9,500, which suggested that
LME copper prices may eventually gravitate upwards and that the
current decline may be temporary.
"The stronger pull may very well be $9,500. The $9,500
copper options have got a very large number of calls open and a
very small number of puts. Prices tend to gravitate towards the
largest number of open options," a Sydney-based trader said.
But the wider macroeconomic environment may still hold some
downside surprises for the industrial metal.
The Greek parliament approved detailed austerity and
privatisation bills on Thursday in a crucial vote to secure
emergency funds and avert imminent bankruptcy.
The focus will now shift to a second assistance package,
likely to be about the same size as last year's 110 billion euro
bailout.
"After Greece's passing of the austerity measures, investors
are becoming concerned again about slowing growth, whether it is
in China or in the U.S.," said Ong.
"We expect the U.S. ISM manufacturing data due later today
to fall from May. Some of these downside surprises remind
investors that the U. S. recovery is slowing and may prompt some
profit-taking after the three-day rally in risk assets," she
added.
ShFE copper stocks rose 9,297 tonnes to 90,089 according to
data released on Friday. For the graphics to global metal
stocks, please click link.reuters.com/deg67n.
Base metals prices at 0810 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 9418.00 -12.00 -0.13 -1.90
SHFE CU FUT SEP1 69880 20 +0.03 -2.74
LME Alum 2535.00 3.00 +0.12 2.63
SHFE AL FUT SEP1 17265 85 +0.49 2.52
HG COPPER JUL1 427.00 -0.20 -0.05 -3.82
LME Zinc 2364.75 -0.25 -0.01 -3.64
SHFE ZN FUT SEP1 17810 50 +0.28 -8.55
LME Nickel 23240.00 -185.00 -0.79 -6.10
LME Lead 2654.00 -30.00 -1.12 4.08
SHFE PB FUT 17160 -40 -0.23 -6.49
LME Tin 26000.00 -50.00 -0.19 -3.35
LME/Shanghai arb 1390
Shanghai and COMEX contracts show most active months
^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE
third month
