* LME copper forward curve still in $20 backwardation * Coming up: U.S. durable goods for Jan at 1330 GMT By Melanie Burton LONDON, Feb 28 (Reuters) - Copper prices rallied to a two-week high on Tuesday, as the European Central Bank's upcoming cash boost for banks and a retracement in crude oil prices renewed appetite for risky assets. The euro traded just below 12-week highs, stocks were firmer and safe-haven German bonds edged lower as the European Central Bank's upcoming liquidity injection supported prices and eclipsed concerns over Greece and the global economic outlook. The pressure on riskier assets from oil prices also eased as Brent crude futures extended losses and slipped below the $124-a-barrel level. Metals were buoyed by upcoming ECB action and a steadier tone in equities more so than fundamentals, analyst Stephen Briggs of BNP Paribas said, which remained lacklustre due to still tepid signs of Chinese demand. Meanwhile, falling crude prices also helped to allay concerns high energy costs could derail the global economic recovery, he said. "Oil rising because of the various supply issues, like Iran, is what makes people start getting twitchy about what impact it would have on the economy," said Briggs. "But copper's rally is getting increasingly hard to justify on fundamental grounds. You have LME stocks of copper falling every day, but stocks in China have risen by more than LME stocks have fallen over the last four months which suggests that demand is not that magnificent by Chinese standards." Three month copper on the London Metal Exchange traded at $8,571.75 a tonne at 1100 GMT up half a percent from Monday's $8,536 a tonne close. Copper, which earlier hit its highest since Feb. 10 at $8,595.75 is rallying back towards five-month peaks of $8,765 a tonne from earlier in February, and has climbed around 13 percent so far this year. China is the world's biggest consumer of metals, accounting for around 40 percent of refined copper demand last year. Demand from the country has been slow to pick up since its Lunar New Year holidays in late January. "With quantitative easing in the air investment interest in commodities may continue to increase," FastMarkets said in a note. COPPER TIGHTNESS Copper stocks in warehouses monitored by the LME fell below 300,000 tonnes for the first time in 2.5 years, data showed on Tuesday, while fresh orders, known as cancelled warrants, jumped by 4,700 tonnes mostly in U.S. locations. There has been a draw on U.S. stocks this year, because Western world premiums, or the price paid on top of metal to take delivery, are relatively cheap due to higher transport costs than from other global locations. The drawdown in LME copper stocks was one factor leading to a tightening in the copper forward spread said a senior trader in London, which although fuelled by short-covering does show some improving confidence about the global copper outlook. "It's a combination of things. We know of some material being reserved and shipped from the States to China," he said. "There has also been short-covering. The first wave was borrowing from Chinese trade, followed by the physical guys, and then the financial guys -- it's more panic and uncertainty than solidly based on fundamentals or technicals," he said. "But overall I have to say people are more confident than at any time in the last three months in the copper market, and this is reflected in the spreads," he added. In other metals, tin was at $24,125 a tonne from $23,705 while zinc, used in galvanizing was at $2,129 from $2,100 on Monday's close. Battery material lead was at $2,265 from $2,247 and aluminium was at $2,345 from $2,331. Nickel was at $20,285 from $20,175. Metal Prices at 1049 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2009 Ytd Pct

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