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METALS-Shanghai zinc hits 9-1/2 year high on supply stress

MELBOURNE, Oct 9 (Reuters) - Shanghai zinc surged 4 percent to reach its highest in nearly a decade on Monday as China markets returned from a week of holidays to follow London prices higher on supply concerns.

FUNDAMENTALS

* Shanghai Futures Exchange zinc rallied by 4 percent to hit its most expensive since March 2008 at 26,935 yuan ($4,048) a tonne.

* Concerns about dwindling supply have lit a fire under prices as the closure of several giant mines last year has crimped production of refined metal. In China, Shfe zinc stocks are the lowest since early 2009, just under 65,000 tonnes. <ZN-STX-SGH>

* On the London Metal Exchange, zinc prices climbed by 1.1 percent to $3,271 a tonne. LME prices, which have climbed by 27 percent so this year, last week hit $3,308.75 which was the loftiest since August 2007.

* LME zinc cash to three month spreads are also showing the most stress in a decade, with LME cash prices more than $65 above the benchmark contract several times in the past month. <CMZN0-3>

* Elsewhere, LME copper edged up by 0.1 percent to $6,675 a tonne, while SHFE copper rose by 2.1 percent to 52,350 yuan ($7,868) a tonne.

* Potentially dampening metals prices for the session, activity in China's services sector grew at its slowest pace in 21 months in September as the pace of new business cooled, a private survey showed.

* Columbus Day in the U.S. and a public holiday in Japan thinned out trading volumes even as Chinese markets reopened.

* Meanwhile, metals found support as the dollar edged back from more than two-month highs as immediate concerns about North Korea's long-range missile capabilities receded.

* Still, Federal Reserve policymakers on Friday signaled they continue to see gradual U.S. interest-rate hikes ahead, signaling dollar-linked headwinds to metals.

* German industrial orders bounced back in August, rising more than expected on strong foreign demand, data showed on Friday, suggesting that factories will contribute to overall growth in Europe's largest economy in coming months.

* Hedge funds and money managers reduced their net long positions in COMEX copper futures and options for the fourth straight week, in the week to Oct. 3, U.S. Commodity Futures Trading Commission data showed on Friday.

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MARKETS NEWS

* Australian shares and U.S. stock futures inched higher on Monday as the flow of economic news remained generally supportive.

DATA AHEAD (GMT) 0145 China Caixin services PMI Sep 0600 Germany Industrial output Aug 0830 Euro zone Sentix index Oct 1400 U.S. Employment trends Sep

BASE METALS PRICES 0151 GMT Three month LME copper 6676 Most active ShFE 52310

copper

Three month LME 2153

aluminum

Most active ShFE 16550

aluminum

Three month LME zinc 3266 Most active ShFE zinc 26790 Three month LME lead 2534 Most active ShFE lead 21310 Three month LME nickel 10615 Most active ShFE 85890

nickel

Three month LME tin 20740 Most active ShFE tin 148240

BASE METALS ARBITRAGE

LME/SHFE COPPER LMESHFCUc3 384.95 LME/SHFE ALUMINIUM LMESHFALc3 -53.17 LME/SHFE ZINC LMESHFZNc3 640.46 LME/SHFE LEAD LMESHFPBc3 204.9 LME/SHFE NICKEL LMESHFNIc3 2387.19

($1 = 6.6533 Chinese yuan renminbi)

(Reporting by Melanie Burton; Editing by Kenneth Maxwell)