METALS-Copper up as U.S. opens, market weighs shutdown impact
* China returns from holiday on Tuesday Oct. 8
* Possible shutdown of Indonesia's Grasberg copper mine
* Nickel surplus grows
* Industry event LME week starts on Monday in London
(Updates prices, adds comment)
LONDON, Oct 4 (Reuters) - Copper turned positive on Friday as U.S. markets opened, helped by bullish technical signals and as investors weighed whether the U.S. government shutdown could delay a Federal Reserve move to cut its stimulus program.
U.S. investors have been influencing metal prices more than usual this week, with participants in top metals consumer China away from the market due to a national holiday and players in Europe cautious ahead of the London Metal Exchange week, an industry event which starts on Monday.
The three-month benchmark contract was up 1 percent to $7,252 a tonne at 1452 GMT on the London Metal Exchange (LME), in thin volumes due to China's absence.
"As fundamentals are sending contrasting signals, financial rather than physical players are influencing the market at the moment and technical signals suggested a rebound today since copper managed to stay above the 13-week moving average of $7,140 yesterday," T-Commodity consultant Gianclaudio Torlizzi said.
"The market is also starting to weigh the fact that the Fed could be more dovish than previously expected and it's not for granted anymore that it will taper in December."
Financial markets have been volatile since a U.S. government shutdown began on Oct. 1 caused by a political deadlock in Congress.
A commodity-friendly stimulus program in the United States was expected to be tapered soon, since the world's largest economy has given signs of recovery, but the shutdown could delay that.
Congress also faces the challenge of raising the U.S. government's borrowing authority or risk default.
"There's bound to be jitters out there given that (the U.S. default) is such a big potential event, but our view is that the possibility of a default is very low," said Daniel Smith, analyst at Standard Chartered.
In the meantime, investors waited for top copper consumer China to return from the Golden Week holiday for more clues on physical demand for the metal.
"For us the market you have to look at is China. That is the most important market in terms of base metals demand. We think the situation in China is getting better," said Nic Brown, head of commodities research at Natixis.
The International Nickel Study Group on Wednesday predicted an all-time high surplus of 140,000 tonnes for 2013. LME stocks have increased by more than 114 percent this year.
Russia's Norilsk, the world's biggest nickel producer, also predicted its Russian nickel output would rise by up to 5 percent by 2016.
"The extent of the surpluses only becomes clear when viewed relative to the small size of the nickel market with annual production of just under 2 million tonnes," said Commerzbank in a note, adding that despite the surpluses, nickel's costly production process should maintain prices.
Investors are also watching Indonesia, home to Grasberg, the world's second-biggest copper mine, which could be forced to shut down next year over the country's ban on unprocessed mineral ores.
Indonesia has attempted to increase influence and profits and encourage local investment from metals companies, but the market remains unconvinced.
Nickel strengthened 0.7 percent to $13,625. Benchmark aluminium traded up 0.8 percent to $1,842.25 a tonne, and zinc rose 0.3 percent at $1,874.25.
Lead was flat at $2,060, and tin gained 1.8 percent to $23,150.
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin
(Editing by Keiron Henderson and Jason Neely)