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METALS-Copper hovers around 8-month highs as market weighs trade deal

Zandi Shabalala

* Key issues linger in U.S.-China trade row

* Copper prices hit highest since May

* Zinc and lead rise to two-month high (Updates with closing prices)

LONDON, Jan 16 (Reuters) - Copper touched an eight-month high on Thursday after the United States and China inked an initial deal in a prolonged trade dispute, boosting hopes for a revival in metals demand.

"Fundamentally, the picture for copper is a lot better than it was last year, and from a macro point of view everything looks better in terms of the trade deal," BMO Capital Markets analyst Timothy Wood-Dow said.

"We can't see the Phase 1 trade deal having a huge effect on base metal prices, (but) the resultant stability will be an incremental positive."

Key issues lingered between the world's two largest economies because some tariffs remained in place even as China pledged to boost purchases of U.S. goods and services by $200 billion.

Benchmark copper on the London Metal Exchange (LME), untraded in closing rings, was bid down 0.2% at $6,277 a tonne after reaching its highest since May 1 at $6,343.

CHINA DATA: The negative impact of the trade dispute was laid bare in data from top metals consumer China on Thursday.

China's new home prices grew at their weakest pace in 17 months in December, while new bank lending fell more than expected last month even as lending for 2019 as a whole hit a record.

More monetary easing and fiscal stimulus is expected this year to spur growth in China, analysts say, which bodes well for metals demand.

U.S. ECONOMY: A gauge of manufacturing activity in the U.S. Mid-Atlantic region rebounded in January to its highest level in eight months and the outlook is the brightest in more than a year and a half.

U.S. retail sales also increased for a third straight month in December.

TRADE: U.S. senators approved a U.S.-Mexico-Canada trade deal.

INVENTORIES: Supporting prices were declining stocks of copper in LME-approved warehouses, which shed 1,275 tonnes to 126,775 tonnes. This was their lowest level since March, and they have declined over 60% since August. <MCUSTX-TOTAL>

COPPER SPREAD: The widening of the discount of LME copper cash over the three-month contract <CMCU0-3> pointed to a well-supplied market, however. It hit $34.50 a tonne, its highest in over three months.

TECHNICALS: Copper's next technical target is $6,433 a tonne, the 50% Fibonacci retracement level, according to broker Marex Spectron.

SUPPLY: Peruvian energy and mining minister Juan Carlos Liu said copper production rose by 4% to 2.5 million tonnes in 2019 from 2.4 million tonnes in 2018. Peru is the world's No.2 copper producer.

OTHER PRICES: Zinc and lead touched their highest point in two months, with zinc closing up 1.6% at $2,422 and lead bid 0.1% higher at $2,001.50.

Aluminum finished up 0.6% at $1,812 a tonne, tin rose 1.3% to $17,675 and nickel fell 3.2% to $13,775. (Additional reporting by Mai Nguyen in Singapore and Peter Hobson in London; Editing by Jan Harvey/Mark Heinrich)