METALS-Copper rises as ECB comments spur "risk-on" rally

* Euro rises, Draghi says ready to defend currency
* Tin drop spurs Chinese buying
* Hopes for quantitative easing as U.S. recovery stalls
* Coming up: U.S. Q2 GDP (1st Est.) Friday

By Chris Kelly and Susan Thomas
NEW YORK/LONDON, July 26 (Reuters) - London copper prices rose for a third
straight day on Thursday after European Central Bank President Mario Draghi's
pledge to protect the euro helped to spark a "risk-on" rally across most
financial markets.
Copper pushed higher alongside rallies in both the euro and global equities
after Draghi's vow to do whatever was necessary to preserve the euro zone.

The rally helped copper prices bounce further away from Wednesday's plunge
to a one-month low in relatively healthy volume on Thursday. But another round
of mixed economic data from the United States and ongoing worries about the
economic health of Europe led some investors to unwind their bullish bets after
prices failed to hold ground above some shorter-term lines of defense, an
analyst said.
"The durable goods orders didn't give market participants the conviction to
challenge last week's high of $3.55 (per lb)," said Ralph Preston, futures
analyst with HeritageWestFutures.com in San Diego, California.
"Price congestion under the 50-day moving average ($3.41/lb) is
corresponding to the bottom half of last week's trading range and in the process
is creating a technical formation known as a bear flag."
COMEX copper for September delivery rose 1.90 cents to settle at
$3.3935 per lb, after dealing between $3.3535 and $3.4380.
COMEX volumes stood at a hefty 69,000 lots in late New York business, up
more than half that of the 30-day norm, according to preliminary Reuters data.
At the London Metal Exchange (LME), three-month copper rose $24 to
end at $7,470 a tonne, recovering from Wednesday's session trough at $7,344.25,
which marked its cheapest price level since June 27.
"The latest comments from the ECB triggered the rally, that's today's story
but in the background I do think the market is starting to price in increasing
likelihood of quantitative easing, and that's visible in gold more than metals,"
said BNP Paribas analyst Stephen Briggs.
Data on Thursday showed new orders for long-lasting U.S. manufactured goods
rose in June although a gauge of planned business spending plans dropped,
pointing to a slowdown in factory activity.
An unexpected drop in U.S. pending home sales added to the pessimistic
economic mood, outweighing moderately upbeat weekly employment data.

The disappointing U.S. data as well as softer corporate earnings results has
led some investors to the view that the Federal Reserve will have to institute
quantitative easing sooner rather than later.
"The copper market, the gold market are all hungry for some sort of central
bank movement ... They have been fishing for this for a while now, and the hook
keeps coming up dry," said Sterling Smith, vice-president of commodity research
at Citibank's Institutional Client Group in Chicago.
Copper, used mainly in construction and power, has shed around 15 percent
from the year's peak hit in February in the harsh economic climate.
On the downside for copper, however, are persistent worries about the debt
crisis in Europe, which now is also posing a bigger risk to China, the world's
largest consumer of copper. The International Monetary Fund said it expects
economic growth to moderate to 8 percent.
"That's all conspiring to see some risk taken off table. All the data points
to economies in recession or continuing to slow, which is not good for the base
metals complex," said Societe Generale analyst Robin Bhar. "The general trend is
still downwards."

CHINA
In tin, a sharp drop in the price has spurred a pickup in China purchases,
RBC Capital said in a note.
Three-month tin, one of the LME's smallest and most illiquid
contracts, hit a 10-month low of $17,125 a tonne on Wednesday. It closed up 2.33
percent at $17,750 on Thursday. The metal is still down around 6 percent this
week.
Tin and benchmark nickel "are both flirting with new yearly lows and
show few signs of reversing," RBC said. "The shorts are piling in but have not
reached the danger zone yet as indicators are not decidedly oversold."
Nickel ended down $10 at $15,890. It hit a three year low earlier this week
of $15,450.

Metal Prices at 1748 GMT

Metal Last Change Pct Move End 2011 Ytd Pct
move
COMEX Cu 339.45 2.00 +0.59 343.60 -1.21
LME Alum 1877.50 7.50 +0.40 2020.00 -7.05
LME Cu 7469.50 23.50 +0.32 7600.00 -1.72
LME Lead 1884.00 29.00 +1.56 2035.00 -7.42
LME Nickel 15860.00 -40.00 -0.25 18710.00 -15.23
LME Tin 17750.00 405.00 +2.33 19200.00 -7.55
LME Zinc 1815.00 14.00 +0.78 1845.00 -1.63
SHFE Alu 15350.00 90.00 +0.59 15845.00 -3.12
SHFE Cu* 54430.00 520.00 +0.96 55360.00 -1.68
SHFE Zin 14460.00 100.00 +0.70 14795.00 -2.26
** Benchmark month for COMEX copper
* 3rd contract month for SHFE AL, CU and ZN
SHFE ZN began trading on 26/3/07