* Markets hoping Fed will take dovish approach to tapering
* LME cash copper near 19-month high against benchmark
* Zinc, lead markets rise, markets in deficit
LONDON, Dec 16 (Reuters) - Copper hit its highest in nearly two months on Monday before closing up half a percent, with investors focused on tightness in nearby supply and falling metal inventories.
Benchmark copper on the London Metal Exchange closed up 0.5 percent at $7,290 a tonne, having earlier hit $7,307.70 a tonne, its highest since October 23.
Copper was the latest daily London Metal Exchange data showing that stocks fell 3,825 tonnes to total 389,175 tonnes - their lowest since early February.
The lack of supply has pushed the backwardation - premium paid for cash copper over the three-month benchmark - to $28 a tonne, near its loftiest in 19 months.
"The copper market is clearly tighter than most people expected six months ago," BNP Paribas analyst Stephen Briggs said.
Copper is up more than 3 percent this month, with data from the Commodity Futures Trading Commission on Friday showing that investors have turned more upbeat on the metal, trimming net shorts, or sell positions, to their lowest level in five weeks.
"As we had suspected, copper saw widespread covering of short positions in the week to Dec. 10. The continued price increase after the reporting date suggests that money managers have been continuing to bet on higher copper prices," Commerzbank said in a note.
Investors were also waiting for hints on when the U.S. Federal Reserve will cut its commodity-friendly stimulus programme.
The Fed meets on Tuesday and Wednesday to discuss whether it should taper its $85 billion monthly bond-buying programme this week or wait until January or later.
Flagging a brightening outlook for metals, Japanese manufacturing sentiment improved in the three months to December for a fourth straight quarter, the Bank of Japan's "tankan" survey showed, boding well for government stimulus policies aimed at beating 15 years of deflation.
In the euro zone, meanwhile, data showed December private sector business activity at its highest since mid-2011, though the chasm between the bloc's two biggest economies widened.
On the downside, growth in China's factory sector has slowed to a three-month low in December as reduced output offset a pick-up in new orders, a preliminary private survey showed on Monday.
China, which consumes about 40 percent of the world's copper, is bracing to pay higher premiums to procure metal next year as global exchange stocks slump.
In other metals, nickel, the worst performer on the LME base metals complex this year, closed at $14,030 a tonne from $14,095, bringing gains for the past two weeks to about 5 percent.
Aluminium closed at $1,793.50 a tonne from $1,799 while tin closed at $22,800 a tonne from $22,750.
Zinc closed at $1,992 a tonne from $1,966, having earlier hit its highest since mid-August at $1,998 a tonne.
Lead finished at $2,166 a tonne from $2,150, having earlier hit its highest since early November at $2,174 a tonne
The global zinc market was in deficit by 2,000 tonnes in the first 10 months of the year, while the global lead market was in deficit by 50,000 tonnes in the same period, monthly bulletins from the Lisbon-based International Lead and Zinc Study Group (ILZSG) showed on Monday.
Three month LME copper CMCU3
Most active ShFE copper SCFcv1
Three month LME aluminium CMAL3
Most active ShFE aluminium SAFcv1
Three month LME zinc CMZN3
Most active ShFE zinc SZNcv1
Three month LME lead CMPB3
Most active ShFE lead SPBcv1
Three month LME nickel CMNI3
Three month LME tin CMSN3