METALS-Copper bounces as market looks ahead to US inflation data

(Updates prices) By Pratima Desai LONDON, Sept 9 (Reuters) - Copper prices bounced on Monday as hopes for stimulus in top consumer China and inventory data showing stocks were likely to fall triggered a buying flurry ahead of U.S. inflation numbers due this week. Traders said that buying on the London Metal Exchange (LME) to take advantage of lower prices than those on the Shanghai Futures Exchange (ShFE) was also behind copper's gains. Benchmark copper CMCU3 on the LME was up 1.2% at $9,102 a metric ton at 1602 GMT. That compared with prices around $10,250 a ton SCFc1 on ShFE, helping to create what is known as arbitrage trade. "Arb buying is providing impetus and Chinese inflation data has got people thinking about stimulus again," one metals trader said, adding that the U.S. inflation report on Wednesday would be a factor in any interest rate decision at next week's U.S. Federal Reserve meeting. Fed rate cuts would help to boost economic activity and demand and weigh on the U.S currency, making dollar-priced metals cheaper for holders of other currencies. Latest data showed that Chinese producer price deflation worsened in August, reflecting a struggling economy. Stocks of copper MCUSTX-TOTAL in LME-approved warehouses are at about 316,450 tons, near five-year highs. However a rise in cancelled warrants, metal earmarked for delivery, to about 11% of total stocks means that copper inventories are likely to slide. Most of the warrants have been cancelled in South Korea and traders expect the copper to head to China in the coming days. Also suggesting healthier Chinese copper demand is the Yangshan premium SMM-CUYP-CN at about $62 a ton, having been at a discount in July. Elsewhere, focus is on large futures positions on the LME to buy aluminium in October and sell in November 0#LME-FBR , which has created a premium, or backwardation, of about $10 a ton for the October contract over November MALV24-X24 . Three-month aluminium CMAL3 rose 0.7% to $2,358 a ton. In other metals, zinc CMZN3 gained 0.5% to $2,732 a ton, lead CMPB3 slipped 0.5% to $1,953, tin CMSN3 was down 0.2% at $30,950 and nickel CMNI3 was little changed at $15,945. (Reporting by Pratima Desai Editing by David Goodman and David Evans) (([email protected])) (( For related news and prices, click on the codes in brackets: LME price overview RING= COMEX copper futures 0#HG: All metals news MTL All commodities news C Foreign exchange rates FX= SPEED GUIDES LME/INDEX ))