METALS-Copper falls as China growth concerns weigh
* Copper on track for 0.7 pct gain for the week
* Dollar drops to 5-week low vs basket of currencies
* Coming up: U.S. consumer sentiment for July at 1355 GMT
LONDON, July 26 (Reuters) - Copper fell on Friday as concerns about growth in top consumer China weighed on the outlook for industrial metals demand.
Three-month copper on the London Metal Exchange fell to $6,960.50 a tonne at 0925 GMT, down 0.7 percent in a second days of losses.
The metal is still headed for its third weekly increase in four, after hitting a one-month high of $7,119 on Wednesday as upbeat U.S. and European data helped counter signs of weakness in the Chinese economy.
Uncertainty about the outlook for growth in China, the world's biggest copper consumer, is likely to dictate price direction for the metal used in power and construction, analysts said.
"There is still concern about the Chinese economy. Market players seem to be weighing the weaker data against what the Chinese government is saying about the economy and many are waiting for more macro data next week for a more convincing picture," said Daniel Briesemann, an analyst at Commerzbank.
China's final HSBC manufacturing purchasing managers index (PMI) is due next Thursday, followed by the HSBC services PMI on August 5.
Losses in copper prices were stemmed by a drop in the dollar against a basket of currencies to a five-week low, on caution about the possibility of the U.S. Federal Reserve delivering a downbeat message after its policy meeting next week.
A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.
Copper also found some support from data which showed that copper stocks held in LME warehouses dropped by 1,775 tonnes , as inventories continue their steady decline from 10-year highs hit in June.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange fell 3.5 percent from last Friday, the exchange said on Friday, but analysts said the cycle of declines could be coming to an end.
"Lower... bonded warehouse materials are placing more emphasis on stock declines in Shanghai inventories, but we could be coming towards the end of declines as seasonal demand passes in the third quarter," ANZ analysts said in a note.
In industry news, Anglo American's new boss vowed to cut spending, halve its pipeline of projects and revive the performance of lagging mines in order to lift cash flow by an annual $1.3 billion.
In supply news, construction of a $3.43 billion sea-water desalination plant at the world's largest copper mine, Chile's Escondida, has been approved in order to secure a steady water supply, majority owner BHP Billiton.
Chile is seeking to improve results at its huge, aging mines, but declining grades, soaring costs, labor unrest and energy woes could curb its ambitious plans.