SINGAPORE, May 24 (Reuters) - London copper rose 0.8 percent on Thursday as the market took a breather after sinking to a 4-1/2 month low in the previous session on risk aversion triggered by worries over Greece's possible exit from the euro zone.
Copper, which has lost almost 10 percent this month, may find support from positive U.S. housing data, although gains were capped as the market remains vulnerable to the implications for the global economy after European leaders were unable to deliver meaningful measures to resolve the region's debt crisis.
"Prices of copper have come off quite heavily in recent weeks so there might be some sense that maybe it was an overreaction," said Alexandra Knight, an economist with National Australia Bank. "From my perspective Greece will ultimately stay in the euro zone as there will be a lot of resistance to letting it exit."
Three-month copper on the London Metal Exchange was up 0.8 percent to $7,594.25 per tonne by 0323 GMT, after falling to $7,503 per tonne on Wednesday - the lowest since early January.
LME copper dropped about 3 percent on Wednesday, triggering a broad-based decline across the base metals complex with lead and zinc each losing nearly 2 percent.
The most-active September copper contract on the Shanghai Futures Exchange slipped 0.5 percent to 54,740 yuan per tonne, tracking Wednesday's LME decline.
European Crisis Versus U.S. Data
European Union leaders, advised by senior officials to prepare contingency plans in case Greece decides to quit the single currency, urged the country to stay the course on austerity and complete the reforms demanded under its bailout programme.
After nearly six hours of talks held during an informal dinner, leaders said they were committed to Greece remaining in the euro zone, but it had to stick to its side of the bargain too, a commitment that will mean a heavy cost for Greeks.
Still, there was positive news from U.S. housing data, which could support industrial metals, particularly copper.
"U.S. housing data was a little bit better than expected," said Knight. "It has gone under the radar because of the focus on Europe, but it will help - particularly copper, which is used in construction."
The U.S. spring home-selling season got off to a strong start in April, with rising sales and prices providing evidence that a housing market recovery was gaining some traction.
The housing sector has been the Achilles' heel of the U.S. economy ever since the home-price bubble burst. Data this week, however, has painted a relatively upbeat picture for the market and underscored the economy's resilience.
The world's top copper producer, Chile's Codelco, said its output fell 10 percent in the first quarter from a year earlier to 373,000 tonnes, but added that it was on target to produce 1.708 million tonnes this year.
The latest data showed copper stocks in LME-registered warehouses rose by 1,725 tonnes to 225,700 tonnes, with net inflows mostly into warehouses in South Korea, where traders suspect Chinese merchants have booked around 110,000 tonnes for delivery.
Metals warehouses in China are said to be so full that workers are starting to stockpile iron ore in granaries and copper in car parks.
Base metals prices at 0323 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7594.25 63.25 +0.84 -0.08
SHFE CU FUT SEP2 54800 -200 -0.36 -1.01
HG COPPER JUL2 342.95 3.35 +0.99 -0.19
LME Alum 2017.00 7.00 +0.35 -0.15
SHFE AL FUT SEP2 15960 -40 -0.25 0.73
LME Zinc 1876.00 -3.00 -0.16 1.68
SHFE ZN FUT SEP2 14675 -80 -0.54 -0.81
LME Nickel 16850.00 95.00 +0.57 -9.94
LME Lead 1940.50 11.50 +0.60 -4.64
SHFE PB FUT 15070.00 -5.00 -0.03 -1.41
LME Tin 19550.00 25.00 +0.13 1.82
LME/Shanghai arb^ 1233
Shanghai and COMEX contracts show most active months
^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month