* Hedge funds, money managers switch to net long - CFTC * China HSBC PMI for April 48.1, below initial 48.3 reading * Coming Up: U.S. ISM non-manufacturing PMI Apr at 1400 GMT (Updates prices) By Melanie Burton SYDNEY, May 5 (Reuters) - Shanghai copper edged up on Monday to near its highest in two months, supported by steady local demand as markets returned from a two-day holiday and tracking gains in London copper prices that climbed on hopes of the U.S. economy gaining speed. Demand for copper in China improved in the past month, boosted by a shortfall of metal in the domestic market and steady second-quarter consumption, typically the peak season for usage. The outlook for copper prices, however, was muddied by the latest economic data that showed contraction in China's manufacturing sector. Activity in China's manufacturing sector contracted for a fourth consecutive month in April, a private survey showed on Monday, adding to questions about whether the world's second-largest economy is still losing momentum. "Every time (copper) has tested the lower end of support it has found buying - but we need a fresh catalyst to make it break its current range. It looks range bound for now," said Tim Radford, analyst at Sydney-based advisory firm Rivkin. The most-traded July copper contract on the Shanghai Futures Exchange ended with a 0.1 percent gain at 47,660 yuan ($7,600) a tonne. Prices earlier climbed as high as 47,920, bumping up near two-month highs of 48,160 a tonne, hit on April 28. Markets were closed on Thursday and Friday. LME copper chalked up gains of 1.1 percent on Friday. The London Metal Exchange will be closed on Monday for a public holiday. The final reading of China's HSBC/Markit purchasing managers' index (PMI) for April came in at 48.1, lower than a preliminary reading of 48.3 but up slightly from an eight-month low of 48.0 in March. Supporting growth hopes and pushing up LME prices on Friday, U.S. employers hired workers at the fastest clip in more than two years in April, pointing to a rebound in economic growth after a dreadful winter and keeping the Federal Reserve on track to end bond purchases this year. The Federal Reserve could start raising benchmark interest rates in just over a year, based on trading in U.S. short-term interest-rate futures after a government report showed employers added many more jobs than expected in April. Hedge funds and money managers switched to a net long position in copper in the week to April 29, according to data from the Commodity Futures Trading Commission. Premiums in Chinese copper markets rallied to their highest in almost three years last week as robust demand met tight local supply, industry sources said, with levels expected to ease slightly near term. Illustrating strong local appetite for metal, physical copper in China was quoted 800 yuan higher than front-month ShFE futures on Monday, but down from 1,570 a week ago. Still, premiums for metal held in China's bonded zones climbed, suggesting import demand is recovering. Copper premiums in Shanghai bonded zones traded at $120-$140 yuan a tonne, up by 45 percent from month-ago levels, according to China price provider Shmet. (www.shmet.com/) In other metals, ShFE aluminium sagged to a more than one-week low, echoing losses in London as prices are weighed by global oversupply. LME aluminium fell 3.6 percent last week.

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