METALS-Optimism, Equities Drive Copper to 3-month High

NEW YORK/LONDON, Aug 2 (Reuters) - Industrial metals began the new trading month on solid footing on Monday, with copper soaring to its loftiest level since April, as investors grew more optimistic about the economic outlook, especially in the Western world economies.

"The markets are seeing a little bit better-than-expected strength in Western economies, and they are just taking that and getting exuberant ... possibly irrational," said Justin Lennon, analyst with Mitsui Bussan Commodities (U.S.A.) Inc.

Copper for September delivery HGU0 on the COMEX metals division of the New York Mercantile Exchange rallied 7.80 cents, or 2.36 percent, to settle at $3.3895 per lb, its highest closing level since April 28.

On the London Metal Exchange, copper CMCU3 for three-months delivery ended up $212 at $7,510 a tonne, its highest since April 29.

Other metals followed suit, with aluminum CMAL3 hitting a three-month high at $2,236 per tonne, tin CMSN3 rallying to its highest since September 2008, at $19,900, and zinc CMZN3, lead CMPB3 and nickel CMNI3 all touching their highest since May.

Economic sentiment received a shot in the arm after data from China, Europe and the United States showed further manufacturing growth.

The U.S. manufacturing sector grew for a 12th straight month in July at a slightly better-than-expected rate, while the euro zone's manufacturing purchasing managers index rose further above the 50 mark that separates growth from contraction, led by Germany and Italy. "

(The data) supports the view that the U.S. economy is not heading for a double dip. This number could possibly outweigh the Asian numbers we saw overnight," said Arne Lohmann Rasmussen, chief analyst at Danse Bank. 

Manufacturing in top metals consumer China shrank in July for the first time since March 2009, with HSBC's PMI dipping below the 50 mark for the first time since the depths of the global recession.

World stocks kicked off August in a strong mood as well, as upbeat results from BNP Paribas (BNPP.PA) and HSBC (HSBA.L) revived confidence in corporate earnings and the economic outlook for the rest of the year.

"There's a broad-based optimism in global markets at the moment (and) the dollar is weakening. The market is relieved that the European numbers are quite good," said Rasmussen.

NOT OUT OF THE WOODS
"The worst seems to be behind us," said analyst Robin Bhar at Credit Agricole. "But we're not out of the woods completely ... with uncertainty in demand, I would go for metals with a supply constraint," said Credit Agricole analyst Robin Bhar, singling out
copper and tin.

Copper inventories, seen by some as indicating demand trends, fell 425 tonnes on Monday, with overall stocks standing at 413,075 tonnes, their lowest since mid-November.

Tin inventories declined to their lowest since June 2009, at 15,005 tonnes. The metal ended up $380 at $19,880 a tonne. LME nickel CMNI3 ended up $700 at $21,850 a tonne, while lead rose $164 to $2,214 a tonne, having earlier risen more than 6 percent to $2,215, its best level since early May.

Zinc climbed $97, or nearly 5 percent, to end at $2,122 a tonne, and aluminum CMAL3 gained $47 at $2,217 a tonne. Bhar said financing deals as well as talk of a launch of an
exchange traded fund (ETF) in aluminum was helping the metal.