SINGAPORE: London copper inched higher on Tuesday after hitting three-week lows the previous session as bargain hunters stepped in, but unease over China's limp return to the market from a week-long break held back upside momentum. Three-month copper on the London Metal Exchange climbed 0.27 percent to $8,141 a tonne by 0349 GMT. The rise partially erased losses made on Monday, when copper fell more than one percent to $8,107 a tonne, its lowest since Jan. 30. Copper prices have built a base above $8,000 this year but have failed to find traction above $8,346 a tonne, a four-month peak hit early this month, with hopes that top consumer China will return as buyers following last week's Lunar New Year holiday keeping a floor under prices. The most-traded May copper contract on the Shanghai Futures Exchange fell 0.34 percent to 58,970 yuan ($9,400) ($9,500) a tonne. It earlier hit its lowest since Jan. 29 at 58,750 yuan a tonne. "I think we've already had the nicest rally that we're going to get this year," Singapore-based Credit Suisse analyst Ivan Szpakowski said. "You can still get some more mild upturns, but frankly as you move to the second half of the year industrial metals are going to trend down. For some it is supply - copper and aluminium - but also because growth momentum is probably going to be strongest at the start of the year," he added. Attention has instead turned to the aftermath of the Group of Twenty meet in Moscow, and as markets looked ahead to a string of indicators of manufacturing health in Europe and the United States later this week. European Central Bank President (ECB) Mario Draghi sought to take the heat out of a debate about currency wars on Monday but said the bank would still have to assess the economic impact of the euro's strength. But in a further sign that banks in the heart of the euro zone are returning to money markets after last year's credit squeeze, German banks' use of ECB crisis funding dropped by a third in January from the previous month. The euro was nursing losses but was above three week lows hit on Friday while share markets in Asia held to tight ranges as the absence of catalysts and a holiday in the U.S. overnight sapped demand. "Over the balance of this week, we could see the softer tone in metals remain in place...in view of the fact that the more recent macro numbers coming out of the US and Europe have turned somewhat soggier," said INTL FCStone in a note. "We have yet to see the Japanese economy recovering in any significant fashion, and while China's growth is ramping up, it is largely on account of over reliance on a dominant government sector," it added. SHFE-LME ARBITRAGE NARROWS The price gap between Shanghai and London copper prices narrowed to around $80 on Tuesday from around $200 before the Lunar New year, pointing to some purchases from China but traders said overall interest was low. "The Chinese don't seem to want to do anything with it today," said one Singapore-based trader. "A lot of Chinese guys are still out. We might get a bit more action when Chinese New Year officially finishes with the Lantern Festival on the 24th," he added.

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