* LME copper tumbles to 10-month low * U.S. Fed warning, China factory output raise demand concern * Comex gold trades below $1,800 for a sixth day By Jane Lee SINGAPORE, Sept 22 (Reuters) - Commodities tumbled on Thursday, led by copper, after the U.S. Federal Reserve's warning of a grim economic outlook and a contraction in Chinese factory output added to concerns about slowing demand for fuels and metals. China's factory sector shrunk for a third consecutive month in September as flagging overseas demand put the brakes on new orders, HSBC's China Flash PMI showed on Thursday. The continued deceleration in the manufacturing sector of the world's second-largest economy came after the Fed warned about a slowdown for the U.S. economy, the world's largest. "It is another blow after the Fed's language about downside risks on the economy really hurt sentiment," said David Thurtell, a Citigroup Inc. analyst based in Singapore. "China is the commodity world's only remaining crutch, and a contraction reading is most unwelcome." Three-month copper on the London Metal Exchange dropped as much as 3.1 percent to a 10-month low of $8,039.75 a tonne, spot gold fell almost 2 percent and crude tumbled more than $1 a barrel. STIMULUS PLAN The Fed's announcement of a $400 billion long-term debt purchase plan failed to alleviate concern that it needs to do more to support economic expansion. "Some investors had hoped for more-aggressive stimulus," Phillip Futures in Singapore wrote in a report Wednesday. The last Fed quantitative easing policy, ended on June 30, flooded the market with cheap money and boosted commodity prices. Weak growth in the developed world has hampered demand for commodities there, but this has been more than offset by booming demand in the developing world, especially from China's now slowing manufacturing sector. The flash Purchasing Managers' Index, designed to preview China's factory output before official data is released, dipped to 49.4 in September from August's final reading of 49.9 and hovered below the 50-point mark that indicates expansion for the third straight month. DOLLAR FACTOR LME copper has fallen 16 percent so far this year after surging 30 percent in 2010. The most-active December copper contract on the Shanghai Futures Exchange SCFc3 lost 4 percent to 60,450 yuan a tonne, the biggest one-day decline in almost seven weeks. U.S. gold was at $1,781.20 an ounce at 0413 GMT, the sixth straight day the precious metal traded below $1,800. Prices reached a record $1,923.70 on Sept. 6. Spot gold fell 0.2 percent and spot silver lost 0.3 percent on Thursday. Brent crude oil LCOc1 tumbled more than $1 to $108.55 a barrel after the dollar surged to a seven-month high against major currencies, making dollar-denominated commodities more expensive for holders of other currencies. The contract was at $108.66 at 0421 GMT. U.S. crude lost $1.47 to $84.45 a barrel, headed for a second quarter of decline. The Reuters-Jefferies CRB index , a 19-commodity global benchmark for the asset class, fell 1.1 percent to a six-week low on Wednesday. (Additional reporting by Rujun Shen; Editing by Michael Urquhart)

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