* Copper rises after ECB cuts rate, Greece scraps referendum * Oil heads for weekly gain; grains dip * Investors cautious before Greece's confidence vote * Deutsche Bank says precious metals remain appealing By Jane Lee KUALA LUMPUR, Nov 4 (Reuters) - London copper rose for a third day on Friday and oil extended gains as Greece backed away from a proposed referendum and the European Central Bank cut interest rates, raising hopes for an easing of the region's debt crisis and buoying riskier assets. Greece's abrupt call for a referendum on a European Union bailout, just days after a deal was struck to save the debt-stricken country from defaulting, had spooked investors and sparked panic in global financial markets. Intense European pressure has forced Greece to seek political consensus on a new bailout plan instead of holding a referendum after EU leaders raised the prospect of a Greek exit from the euro to preserve the single currency. "There's been no shortage of events to swing sentiment in markets," said Soozhana Choi, the Singapore-based head of Asia commodities research at Deutsche Bank AG. "The volatility is definitely far from over. There's a lot of implementation risk in Europe, concerns about a hard landing in China and a still-weak recovery in the U.S." Three-month copper on the London Metal Exchange climbed 1.8 percent to $8,053.25 a tonne at 0708 GMT. Brent crude LCOc1 was at $110.94 a barrel, up 11 cents, with prices heading for a second week of increase. U.S. crude CLc1 inched up 40 cents to $94.47 a barrel, rising for a third straight day and on track for a fifth week of increases. Europe's woes have started to crimp growth in China, and U.S. Federal Reserve Chairman Ben Bernanke warned this week that Europe posed risks to growth in the world's largest economy. China's big manufacturers ran at their slowest pace in almost three years, according to data released on Tuesday. The official Purchasing Managers' Index for October recorded its lowest reading since February 2009. The world's largest energy user is taking steps to rein in inflation, but its measures have raised concern demand for energy and commodities will also hit the brakes. This week's collapse of MF Global Holdings Ltd , run by ex-Goldman Sachs head Jon Corzine, after bad bets on European debt heightened concerns that the crisis is affecting more than just the region. The most-active January copper contract on the Shanghai Futures Exchange SCFc3 jumped 3.5 percent to 58,780 yuan ($9,254.65) per tonne by its midday close. "The rate cut by the ECB gave base metals a short-term boost today, and investors are comforted that the Greece referendum turned out to be a bit of a Greek drama," said Du Xiaohua, a trader at Dongzheng Futures in Shanghai. The ECB unexpectedly lowered rates by a quarter point on Thursday and President Mario Draghi, speaking at his first policy meeting, said the euro zone could subside into a "mild recession" in the latter part of 2011. Asian shares rose and the euro steadied on Friday but investors remained cautious over a confidence vote in the Greek parliament later in the day. Greek Prime Minister George Papandreou bowed to cabinet rebels and agreed to step down and make way for a negotiated coalition government if his Socialists back him in a confidence vote on Friday, government sources told Reuters. GOLD'S APPEAL Gold ticked lower on Friday after rising more than 1 percent in the previous session, but prices held near their highest in six weeks due to the uncertainty surrounding the euro zone debt crisis. Spot gold fell $1.41 to $1,761.24 an ounce, but headed for its second week of gains. Gold jumped as high as $1,767.40 on Thursday, its strongest since Sept. 22. It reached a record around $1,920 in September. "Ultimately, we believe that precious metals will remain appealing for investors as a protection against tail events," Deutsche Bank's Choi said. "Industrial metals could remain under pressure and tends to be more vulnerable in a negative macro environment relative to other commodities sectors." GRAINS DROP Grains also fell, led by wheat. Chicago Board of Trade December wheat lost 0.2 percent to $6.34-1/2 a bushel and December corn also fell 0.2 percent to $6.52-1/4 a bushel. Actively traded January soy was little changed at $12.18-1/4 a bushel. For the week, front-month wheat Wc1 is on track to register losses following three straight weeks of gains, while corn Cc1 is set to drop after four weeks of gains. (With additional reporting by Carrie Ho and Lewa Pardomuan; Editing by Himani Sarkar)

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