(Recasts, adds closing prices)
* ShFE aluminium hits contract low on overcapacity worries
* Investors nervous about more company default in China
* Coming up: FOMC ends meeting, to announce rate decision
LONDON, March 19 (Reuters) - London Metal Exchange (LME) copper rose sharply on Wednesday after the market's drop to its lowest level in more than 3-1/2 years prompted buying from speculators and consumers.
Three-month copper on the London Metal Exchange touched $6,321 a tonne, its lowest since mid-2010, before soaring to $6,584 in intraday trade. It closed at $6,553, up from $6,483 at the close on Tuesday.
In New York, May copper futures followed suit, rose more than 1 percent to $3.995 per lb.
"I can't see any fundamental news that would have done that," BNP Paribas analyst Stephen Briggs said.
"I think it may be internal to the market, somebody assumed copper would go lower and was stopped out. There are hints that might be a possibility."
Dealers said the magnitude of losses earlier in the session had triggered automatic sell orders but that halted as prices pierced $6,376.12, the 3-1/2 year low it hit last week.
"A big speculator or fund, someone who is not afraid to throw some volume about, caught everyone out and drove it back up again," a metals trader said.
"I haven't seen movement like that in copper in a long time. It's got nothing to do with fundamental news."
The market remained nervous, with the looming bankruptcy of a Chinese developer owing billions of yuan to domestic banks again raising credit worries in China after this month's first bond default from a private company.
"They (credit fears) are rumbling along there doing more damage," Briggs said.
He added that while last week's fears that China's copper financing deals would unravel were overdone, they remain a concern. "The credit concerns call into question the scope for increased financing deals in a year which the market is likely to be in surplus," he said.
Still, there is no sign yet that defaults have sparked upheaval in the country's credit markets or that China's frothy real estate sector is about to go into meltdown, even if investors are watching nervously.
In industry news, Jinchuan Group, China's third-largest copper producer, declared force majeure on some copper concentrate purchases after a technical problem that will keep it from hitting a 2014 target of about 400,000 tonnes of copper.
In other metals, aluminium closed at $1,739 a tonne from $1,736 at the close on Tuesday. The contract also hit a month low at $1,704.25 a tonne.
London Metal Exchange data earlier showed aluminium stocks held in warehouses shot up by 280,000 tonnes in one day to touch 5.435 million tonnes, taking them firmly back near recent record highs.
The aluminium contract in Shanghai hit its lowest since its 2005 inception, weighed down by oversupply, and as tighter credit in China takes a toll on demand.
In the other markets, the world's major stock and bond markets were little changed ahead of comments from U.S. Federal Reserve Chair Janet Yellen at the conclusion of the Fed's two-day policy meeting.
Elsewhere, worries about Western sanctions against Russia for its move to annex the Crimea region in Ukraine, combined with a halt to Indonesian ore supplies spurred LME nickel prices to an 11-month peak of $16,385 a tonne.
Nickel closed at $16,325 a tonne from $16,190 at the close on Tuesday.
China's supplies could potentially be cut further thanks to the production problem at Jinchuan, the country's top nickel producer.
LME lead closed at $2,077 a tonne from $2,069.50 and tin closed at $23,225 from $23,170. Zinc, untraded at the close, was last bid at $1,962 per tonne from $1,979.
The global lead market was in deficit by 31,000 tonnes in January, while the global zinc market was in a 61,000 tonne deficit, a monthly bulletin from Lisbon-based International Lead and Zinc Study Group (ILZSG) showed on Wednesday.
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
(Additional reporting by Susan Thomas, editing by David Evans)