* Copper at its highest since April 11 * Chile copper output tumbled 8.5 pct in June; more losses seen in July * Coming Up: euro zone inflation, flash yy, July; 0900 (Updates prices, adds quotes and details) By Carrie Ho SHANGHAI, July 29 (Reuters) - Copper rose on Friday to its highest in more than three months on continued Chilean supply problems but debt woes in the United States and Europe are expected to limit price rises. Three-month copper on the London Metal Exchange rose 0.7 percent to $9,886.25 a tonne by 0159 GMT, its highest since April 11, and is on track for a weekly rise of 2.2 percent. It gained 0.4 percent in the last session. The most-active October copper contract on the Shanghai Futures Exchange SCFcv1 rose 0.9 percent to 73,400 yuan per tonne, also its highest since April 11. It is on track for a weekly rise of 1.7 percent. Chile's Escondida mine, which extracts about 7 percent of the world's copper, on Wednesday declared force majeure on copper concentrate sales amid a six-day strike that has hit output at the world's top deposit. "What's happening in Escondida is keeping prices firm," said Jonathan Barratt, managing director of Commodity Broking Services. "It seems that the strike will be extended. There has been a rash of labour action that has kept copper supply tight and causing concerns." Chile's copper output tumbled 8.5 percent to 426,477 tonnes in June after a contract workers' strike, heavy rains and power outages hit operations at the world's top copper producer, the government said on Thursday. The country's copper production is set for another big drop in July after a string of strikes at some of the world's top mines and a harsh winter storm that halted operations across the country's mining heartland. Concern over tight supply has for the moment outweighed worries over an impasse in the U.S. debt ceiling debate. A Republican plan to cut the U.S. budget deficit stumbled toward a vote in Congress on Thursday and its expected demise could force a compromise to avert an imminent and unprecedented debt default by the world's largest economy. Comments by Standard and Poor suggested that the rating agency would probably be convinced to keep U.S. ratings at AAA if lawmakers were to show commitment to solving the debt problem with bold deficit-cutting measures. But Republican Speaker John Boehner's deficit cut plan is expected to be doomed in the Senate, where the vote will move after approval by Congress, and where Democratic Leader Harry Reid is pushing his own deficit-reduction plan. Fears of debt contagion in Europe also still trouble global financial markets. Italy's borrowing costs soared at a closely watched bond auction on Thursday as investors worried by the euro zone debt crisis and an impasse over the U.S. debt ceiling exacted a high risk premium. Economic sentiment in the euro zone worsened more than expected this month with optimism fading in all sectors, data showed on Thursday, signalling slower expansion of the region's economy in the second half of this year. Base metals prices at 0159 GMT Metal Last Change Pct Move YTD pct chg LME Cu 9886.25 71.25 +0.73 2.98 SHFE CU FUT OCT1 73400 650 +0.89 2.16 LME Alum 2647.00 9.00 +0.34 7.17 SHFE AL FUT OCT1 18355 -05 -0.03 9.00 HG COPPER SEP1 449.80 2.20 +0.64 1.32 LME Zinc 2528.75 9.75 +0.39 3.05 SHFE ZN FUT OCT1 19045 135 +0.71 -2.21 LME Nickel 24700.00 150.00 +0.61 -0.20 LME Lead 2692.00 37.00 +1.39 5.57 SHFE PB FUT 17770 70 +0.40 -3.16 LME Tin 28800.00 300.00 +1.05 7.06 LME/Shanghai arb 1128 Shanghai and COMEX contracts show most active months ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month Shanghai lead launched on March 24 (Reporting by Carrie Ho; Editing by Clarence Fernandez)

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