SHANGHAI (Reuters) - London copper fell back on Monday, giving up part of its gains of 4 percent in the previous session, after weekend data showed a factory slump had deepened in June in one of Asia's biggest exporters, China. The decline in China's purchasing managers' index (PMI) fanned concerns over demand for industrial metals and followed weak factory activity data in Japan on Friday. The soft data took some of the shine off last week's policy breakthrough in the euro zone, where leaders agreed to expand the use of rescue funds in ways that would ease market pressures on indebted countries. Three-month copper on the London Metal Exchange was down 0.7 percent at $7,638 per metric ton (1.1023 tons) by 12.20 a.m. EDT, after surging 4.1 percent on Friday - its largest single-day rise since Nov 30. "The latest China PMI data has dampened sentiment, underlining how fragile the global economy is," said Orient Futures derivatives director Andy Du. The factory slump in China and Japan was deepened by crumbling orders from abroad that dragged activity to seven-month lows, fuelling fears the health of the global economy was deteriorating. The data tempered market optimism over Europe's surprise deal last week, which led to a broad rally in riskier assets including commodities, equities and the euro. Under pressure to prevent a catastrophic breakup of their single currency, euro zone leaders had agreed on Friday to let their rescue fund inject aid directly into stricken banks from next year and intervene on bond markets to support troubled member states without them having to adopt extra austerity measures. The most-active October copper contract on the Shanghai Futures Exchange, which had risen 1.9 percent in the prior session, edged up further on Monday by 0.4 percent to 55,470 yuan ($8,700) per metric ton, catching up with London's gains on the euro zone news last week. Traders noted that much of Shanghai copper's rise so far has been due largely to short-covering, as the ShFE website showed a drop in open interest despite prices moving up, indicating investor caution. "The euro zone's surprise decisions last week were highly supportive to prices in the short term, but this effect won't last as investors know the region's problems are a longer term problem that will be hard to deal with," Du added. "Investors are less focused on the Chinese physical copper market for now as things are still gloomy, with downstream industry orders still sluggish." Market players noted that copper demand had improved in recent weeks as bargain-hunting consumers restocked a bit to take advantage of lower prices, but overall demand remained low. In the United States, concerns over the economy were stirred after consumer spending growth ground to a halt in May as auto purchases flagged, while confidence ebbed to a six-month low in June, the latest signs of trouble for the economy. Federal Reserve officials on Friday said they were keeping an eye out for any signs that slowing growth was raising deflation risks but differed on how worrisome sluggish job markets were for the modest U.S. economic recovery. Their assessment of how well the world's biggest economy is doing will inform their decision on whether the Fed should roll out more aggressive monetary easing measures - a move that is likely to boost commodity prices. Base metals prices at 12.20 a.m. EDT Metal Last Change Pct Move YTD pct chg LME Cu 7638.00 -52.00 -0.68 0.50 SHFE CU FUT OCT2 55470 230 +0.42 -0.29 LME Alum 1904.00 -7.00 -0.37 -5.74 SHFE AL FUT OCT2 15465 75 +0.49 -2.37 HG COPPER SEP2 346.70 -2.95 -0.84 0.90 LME Zinc 1856.00 -24.00 -1.28 0.60 SHFE ZN FUT OCT2 14700 115 +0.79 -0.64 LME Nickel 16650.00 -80.00 -0.48 -11.01 LME Lead 1855.00 -6.00 -0.32 -8.85 SHFE PB FUT 14730 55 +0.37 -3.66 LME Tin 18800.00 25.00 +0.13 -2.08 LME/Shanghai arb 1258 Shanghai and COMEX contracts show most active months ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month

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