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METALS- Shanghai copper rallies for 4th day, climbs to two-month high

A. Ananthalakshmi
Tuesday, 24 Dec 2013 | 10:50 PM ET

* Shanghai prices track overnight gains in COMEX futures

* COMEX trading boosted by errant buy order

* Prices to be supported in near-term by China demand -analyst

SINGAPORE, Dec 25 (Reuters) - Shanghai copper climbed to a two month high on Wednesday, rising for a fourth straight session as overnight gains in New York and strong U.S. data underpinned prices.

Copper futures in New York rallied more than 2 percent on Tuesday after an errant buy order placed shortly before midday there unleashed a burst of buying as stops were triggered, sending prices to their highest since April.

"Shanghai prices are to some extent following that abnormal rally overnight on COMEX," said a Shanghai-based trader.

"We saw some good fresh buying this morning. Since the Western markets are closed, people are focusing today on the Chinese equity and money markets."

The most-traded December copper contract on the Shanghai Futures Exchange climbed 1.2 percent to 51,960 yuan ($8,600) a tonne by 0307 GMT Wednesday. It earlier hit 52,290 yuan - its highest Oct. 23.

The London Metal Exchange will be shut on Wednesday and Thursday for Christmas and Boxing Day holidays. COMEX will be closed on Wednesday.

Shanghai and London copper prices have dropped around 8 percent this year, reflecting slowing demand from top consumer China that has kept prices in narrow ranges for most of the second half of 2013.

Recently, liquidity issues in China have also added to worries. China's interbank cash crunch eased on Tuesday after the central bank injected funds through normal channels for the first time in three weeks, but traders warned that conditions remained tense.

However, strong data from the world's largest economy, the United States, should support copper prices, they added.

Orders for long-lasting U.S. manufactured goods surged in November and a gauge of planned business spending on capital goods recorded its largest increase in nearly a year, pointing to sustained strength in the economy.

Analysts say copper has held up quite well despite the Federal Reserve's decision last week to start ending its bond-buying stimulus, a major support for commodity prices for years.

"The expectation of tapering was already reflected in the price before the announcement," said Tan Yuan, an analyst with Jinrui Futures in Shenzhen, adding that he does not expect the Fed to cut bond purchases dramatically in the first quarter.

"Copper prices will also be supported in the near term as China's demand will steadily increase as some companies buy stock before the Chinese New Year," he said.

PRICES

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

($1 = 6.0714 Chinese yuan)

(Editing by Himani Sarkar)