Copper rose on Thursday, clawing back some of the previous day's losses, as investors crept back into the market, heartened by data hinting that top industrial metals consumer China's economy will avoid a sharp slowdown after a period of strong growth. London Metal Exchange (LME) three-month copper rose 0.6 percent to $8,550 per tonne at 1201 GMT from a close of $8,499 after a volatile session on Wednesday, when it touched its highest since Feb. 10 at $8,695.25 before wiping out the gains. Copper fell on Wednesday along with other risk asset markets like gold, crude oil and the euro, on cautious comments on the U.S. economy by Federal Reserve Chairman Ben Bernanke, who also stopped short of signalling more monetary stimulus. "Although commodities markets had been hoping for a boost from quantitative easing, the fundamental story suggests that economic growth is going to be stronger," said Caroline Bain, a senior commodities editor and economist at the Economist Intelligence Unit. "Maybe it is a return to thinking about fundamentals and that the outlook for metals consumption is perhaps better than thought." China's official purchasing managers' index rose to 51.0 in February from 50.5 in January, as export orders bounced back. While China's official sentiment index of purchasing managers and HSBC's private-sector factory data reminded investors of the fragile state of the global economy, it suggested Beijing could avoid a hard landing. "This is also telling us that there's less possibility for China to loosen monetary policy further", with the economy getting back on its feet, said Bonnie Liu, a commodity analyst at Macquarie in Shanghai. China is the world's biggest consumer of metals, accounting for around 40 percent of refined copper demand last year. FOCUS "At the moment, the focus is very much on policy decisions but we would note that there are interesting industrial metals specific factors working in the background," Credit Suisse said in a research note. It pointed to the Institute for Supply Management-Chicago whose measure of manufacturing in the U.S. Midwest region rose to a 10-month high of 64 in February from 60.2 in January. A reading above 50 indicates expansion in the regional economy. At the same time, cancelled warrants, or inventories already earmarked for delivery, at the LME continued to rise. "This suggests that physical demand is higher than many market participants believe. We expect the price path in the coming days to be volatile," Credit Suisse said. "Nevertheless, price risks are to the upside." Copper stocks in warehouses monitored by the LME fell to a 2-1/2 year low of 292,250 tonnes, down 4,175 tonnes, data on Thursday showed. The ratio of cancelled warrant to total stocks stood at 32.2 percent. In contrast, stockpiles of copper at warehouses monitored by the Shanghai Futures Exchange remained near 10-year highs at more than 216,000 tonnes, despite dropping slightly last week for the first time since early December. Global miner Rio Tinto said it expects the copper market to stay tight despite growth in supply, with the company anticipating rising costs and supply disruptions to continue, following strikes last year. Rio, which is looking to sell most of its Australia and New Zealand aluminium business, remains bearish on the aluminium market, with smelters facing a margin squeeze as costs rise and aluminium prices remain weak. Aluminium was up 0.2 percent at $2,333.50 from $2,330 at the close on Wednesday. Nickel was the top performer in the base metals complex, rising 2.9 percent to $19,820 per tonne from a close of $19,255. "Nickel had a horrible close yesterday but did manage to bounce off of its 100 day moving average, thus setting the market up for a bout of short covering," RBC Base Metals said in a research note. Tin was up 1.6 percent at $23,999 from $23,625 at the close on Wednesday while zinc bucked the trend, dipping to $2,111 from $2,112 at the close. Lead was up 1.3 percent at $2,188 from $2,160 and aluminium was almost flat at $2,330.75 . Metal Prices at 1210 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct

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