* Euro gains ahead of ECB liquidity injection * Slow China demand limits copper's gains, PMI data eyed * Coming Up: U.S. consumer confidence; 1500 GMT (Recasts lead, updates prices) By Manolo Serapio Jr SINGAPORE, Feb 28 (Reuters) - London copper regained its footing on Tuesday, along with the euro, ahead of a second liquidity infusion by the European Central Bank to ease debt strains, although slow demand from top consumer China kept gains in check. The euro rose against the dollar ahead of an estimated half a trillion euros in cheap three-year loans the ECB is expected to offer on Wednesday. Copper has risen more than 12 percent this year, but has found it hard to stretch gains, given slack Chinese demand since the Lunar New Year break in January. Three-month copper on the London Metal Exchange rose 0.3 percent to $8,557 a tonne by 0715 GMT, off an earlier low of$8,490. Copper is still more than 2 percent off a five-month high of $8,765 reached on Feb. 9. The most-traded May copper contract on the Shanghai Futures Exchange climbed 1.1 percent to 61,060 yuan ($9,700) a tonne. "I believe Chinese demand is recovering but at a very, very slow pace," said Judy Zhu, commodity analyst at Standard Chartered in Shanghai, citing a modest drop in Shanghai copper stockpiles last week. "Chinese demand is going to improve in the weeks ahead on seasonal factors, but the recovery should be slow because some copper consumers, like home appliance makers, are dealing with huge stockpiles due to weak order books from both domestic and overseas markets." Copper inventories in Shanghai warehouses dropped by around 1,000 tonnes to 216,086 tonnes CU-STX-SGH last week from a near 10-year high above 217,000 tonnes the previous week. SOFT PHYSICAL PREMIUMS It was the first drop in Shanghai copper stockpiles since early December, but Macquarie Commodities Research said it might be premature to read much into the figure. "Our sources on the ground in China still point to soft physical premiums this week so we would caution extrapolating an overly bullish conclusion from this single draw," it said in a note. With China consuming around 40 percent of global copper, market players say unless the country's demand picks up strongly, copper's rally this year could soon lose steam. As such, China's official purchasing managers' index, due out on Thursday, will be keenly watched. A Reuters poll suggests the number, which measures activities in China's manufacturing sector, edged up to 50.7 in February from 50.5 in January. HSBC flash PMI -- a sister survey and also the earliest indicator of China's industrial activity -- hit a fourth-month high of 49.7 in February, but new export orders shrank the most in eight months as global demand weakens. Continuously positive economic data out of the United States is helping shield copper from a sell-off. There was further evidence of a recovering U.S. housing market on Tuesday, with data showing that contracts to purchase previously owned U.S. homes neared a two-year high in January. That data, along with oil's fall, helped the S&P 500 close at its highest since June 2008. "With many industrial metals still being undervalued...we think the sector is likely to see further gains as long as economic data continues to signal stabilization of growth," investment bank Credit Suisse said in a note. With increased liquidity across the world as central banks ease credit conditions to boost growth, StanChart's Zhu said this should lift copper to an average of $9,000 a tonne during the third quarter. Base metals prices at 0715 GMT Metal Last Change Pct Move YTD pct chg LME Cu 8557.00 21.00 +0.25 12.59 SHFE CU FUT MAY2 61060 660 +1.09 10.30 HG COPPER MAR2 389.00 0.95 +0.24 13.21 LME Alum 2329.00 -2.00 -0.09 15.30 SHFE AL FUT MAY2 16270 15 +0.09 2.68 LME Zinc 2105.00 5.00 +0.24 14.09 SHFE ZN FUT MAY2 16125 175 +1.10 8.99 LME Nickel 20260.00 85.00 +0.42 8.28 LME Lead 2247.00 0.00 +0.00 10.42 SHFE PB FUT 16310.00 180.00 +1.12 6.71 LME Tin 24050.00 345.00 +1.46 25.26 LME/Shanghai arb^ 2014 Shanghai and COMEX contracts show most active months ^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month ($1=6.3019 Chinese yuan) (Reporting by Manolo Serapio Jr.; Editing by Clarence Fernandez)

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