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METALS-Nickel, zinc rebound, China economy jitters cap gains

(Adds comment, detail, updates prices) MELBOURNE, Sept 25 (Reuters) - London zinc and nickel rose on Monday, rebounding from declines in the previous session, but price gains were limited as investors remained cautious on the outlook for the economy in China, the world's top metal consumer, and for the U.S. dollar. Investors had been encouraged to cash-in profits in a recently rising metals market after China's economic growth showed signs of slowing in August, said Dominic Schnider of UBS Wealth Management in Hong Kong, suggesting any bounce may prove short-lived. "I can't get excited (about metals) I'm sorry to say. Chinese numbers have not really been hinting in the right direction from a fixed-asset investment point of view. I also think the market is underpricing the Fed, so the dollar has the potential to gain some more." A stronger dollar erodes the purchasing power for metals buyers paying with other currencies.

FUNDAMENTALS

* COPPER: London Metal Exchange copper rose 0.3 percent to $6,478.50 a tonne by 0554 GMT. On Friday, prices fell to their lowest since Aug. 16 at $6,366. Shanghai Futures Exchange copper rose 0.9 percent to 50,320 yuan($7,619).

* NICKEL: LME nickel which dropped by more than 5 percent on Friday after the ShFE hiked trading fees, recovered dropping 1.9 percent.

* ZINC: LME zinc rose nearly 2 percent, regaining its losses from Friday.

* INVESTORS: Hedge funds and money managers cut their net-long position in COMEX copper in the latest week, U.S. Commodity Futures Trading Commission data showed on Friday.

* CHINA LENDING: China's latest push to revive its bloated state-owned sector is set to pick up pace this year, with bankers and investors expecting possible spin-offs and asset sales to follow a key Communist Party Congress in October.

* S. KOREA JITTERS: Some banks have begun to pare back credit lines to smaller trading companies holding industrial metals in South Korea amid escalating tensions over North Korea's nuclear and missile program, two industry sources said this week.

* CHINA MINING: China's mining industry will shrink if the government does not cut it some slack in return for compliance with strict environmental policies, the head of one of the country's largest gold miners said on Saturday.

* ZINC M&A: Kazakhstan-focused copper miner Central Asia Metals said it would buy Bermuda-based Lynx Resources Ltd, a miner of lead and zinc, in a $402.5 million reverse-takeover deal from its owners.

* CHINA POLLUTION: Cities in China's eastern province of Anhui are issuing plans to curb production in the steelmaking, non-ferrous smelting, cement and coal-fired power sectors over the coming winter in a drive to meet a politically crucial air pollution target.

* COMING UP: Germany Ifo business climate Sep at 0800 GMT PRICES

BASE METALS PRICES 0555 GMT Three month LME copper 6474.5 Most active ShFE copper 50300 Three month LME aluminum 2149.5 Most active ShFE 16475

aluminum

Three month LME zinc 3084.5 Most active ShFE zinc 25175 Three month LME lead 2489 Most active ShFE lead 20725 Three month LME nickel 10540 Most active ShFE nickel 84030 Three month LME tin 20585 Most active ShFE tin 145370

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 338.63 LME/SHFE ALUMINIUM LMESHFALc3 -16.03 LME/SHFE ZINC LMESHFZNc3 820.14 LME/SHFE LEAD LMESHFPBc3 206.74 LME/SHFE NICKEL LMESHFNIc3 1796.37

($1 = 6.6042 Chinese yuan renminbi)

(Reporting by Melanie Burton; Editing by Richard Pullin and Christian Schmollinger)