METALS-Copper slips to three-week lows as China holds fire

* LME-ShFE copper price gap narrows on small China buys

* U.S. returns from President's day holiday on Tuesday

* Coming up; Germany ZEW economic sentiment ; 1000 GMT

(Adds detail, comment, updates prices) SINGAPORE, Feb 19 (Reuters) - London copper drifted to a three-week low on Tuesday as unease over China's limp return to the market from a week-long break weighed on prices, although bargain hunting limited losses. Three-month copper on the London Metal Exchange traded down 0.14 percent to $8,107.75 by 0707 GMT. Prices erased early gains to hit $8,099.25 a tonne earlier, which was the lowest since Jan. 29. 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. Expectations that top consumer China will buy in size now that Lunar New Year has passed has helped keep a floor under prices. The most-traded May copper contract on the Shanghai Futures Exchange fell 0.66 percent to 58,780 yuan ($9,400) a tonne. It earlier hit its lowest since Jan. 29 at 58,700 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 stock index futures pointed to a flat open on Tuesday, with German data and corporate results due later in the day expected to set the market's direction. 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. 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 United States 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 U.S. and Europe have turned somewhat soggier," INTL FCStone said. "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 said in a note.

SHFE-LME ARBITRAGE NARROWS The price gap between Shanghai and London cash 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.

PRICES

Base metals prices at 0707 GMT

Metal Last Change Pct Move YTD pct chg LME Cu 8107.75 -11.25 -0.14 2.25 SHFE CU FUT MAY3 58780 -390 -0.66 1.91 HG COPPER MAR3 367.65 -6.05 -1.62 0.66 LME Alum 2115.50 -1.50 -0.07 2.15 SHFE AL FUT MAY3 15090 -115 -0.76 -1.66 LME Zinc 2149.00 -6.00 -0.28 4.14 SHFE ZN FUT MAY3 15785 240 +1.54 1.54 LME Nickel 17765.00 -90.00 -0.50 3.56 LME Lead 2384.50 -5.50 -0.23 1.90 SHFE PB FUT 15415.00 -55.00 -0.36 1.08 LME Tin 24327.00 27.00 +0.11 3.96 LME/Shanghai arb^ 441

Shanghai and COMEX contracts show most active months ($1 = 6.2427 Chinese yuan)

(Editing by Miral Fahmy and Himani Sarkar)