METALS-Copper Tumbles as Data Raises Recovery Doubts

NEW YORK/LONDON, July 1 (Reuters) - Copper fell to a two week low on Thursday, as risk aversion gathered steam after weak macro economic data from the United States and top consumer China raised doubts about the pace and strength of the global economic recovery.

Copper for September delivery HGU0 on the COMEX metals division of the New York Mercantile Exchange plunged 7.35 cents, or 2.5 percent, to settle at $2.8770 per lb, after dealing between $2.9360 and $2.8555, its lowest level since June 10.

On the London Metal Exchange, benchmark copper for three-months delivery CMCU3 slipped $175 to end at $6,335 a tonne, near a session low of $6,318.

Global equities, seen by some as a proxy for economic growth, fell in Asia and Europe after manufacturing data showed China's rapid economic growth was slowing, increasing fears of a double dip recession.

"The PMI for China showed weaker growth," said Daniel Smith, analyst at Standard Chartered. "It was down but still showing growth and that is what the Chinese governments wants to see -- it is trying to engineer a slowdown."

China's official purchasing managers' index (PMI) fell to 52.1 in June from 53.9 in May, knocked by government measures to cool the property market and restrain bank lending.

According to the National Bureau of Statistics, the drop in the official PMI also reflected the "grim" outlook for exports, given debt woes rattling the euro zone and China's recent abolition of some export tax rebates.

Denting sentiment later in the session, data from the U.S. showed new jobless claims benefits unexpectedly rose last week, while manufacturing activity slowed in June, heightening fears the country's economic recovery was stalling.

"It's the weak data out of China, out of the U.S., and now tomorrow we have got the big monthly unemployment number ... we're pricing in a bad number," said Frank Cholly, senior market strategist with Lind-Waldock.

The key June employment report is expected to show the first decline in payrolls this year, down 110,000, according to a Reuters poll.

"There are worries about double dip and rightly so. We are going into a period of slower growth. The enormity of problems in Europe, possible slowdown in China and the U.S. is enough to tip it," said BaseMetals.com analyst William Adams.

FACTORED IN
Copper closed the second quarter of 2010 on Wednesday with a loss of more than 17 percent, snapping a string of five consecutive quarterly gains and suffering its biggest three-month decline since the late-2008 financial crisis.

Although most London Metal Exchange stocks fell strongly in the second quarter, analysts say this indicator of possible demand strength is seasonal and has long been factored into prices.

"The decline in stocks is not in all cases reflecting metal going to consumers, it's possible we're seeing stocks shifting location," said Stephen Briggs, analyst at BNP Paribas.

"In aluminum, everybody believes more is being produced than consumed and yet LME stocks are declining."

Aluminum CMAL3 shed $51.50 to close at $1,926 a tonne, with latest data showing LME stocks continued to fall from record levels, dropping 6,050 tonnes to total 4.42 million tonnes.

Zinc CMZN3 ended down $47 at $1,743, lead CMPB3 was unchanged at $1,735, and tin CMSN3 dropped $490 to finish at $16,960. After-hours, losses mounted to two-week lows at $16,950. Nickel CMNI3 ended at $19,000, down $745 on the day, and near an earlier three-week low at $18,900.