METALS-Copper jumps to 3-week peak on bright econ outlook

* Copper boosted by strong macroeconomic indicators

* Fund buying helps base metals' recovery

(Recasts with New York closing copper price, adds analyst
comments, New York dateline/byline)

By Chris Kelly and Michael Taylor

NEW YORK/LONDON, Feb 19 (Reuters) - Copper prices soared to their
highest levels in more than three weeks on Friday, as improved
economic sentiment in the United States and expectations of robust
Chinese demand bolstered the funds' appetite for the industrial
metal.

Copper for March delivery HGH0 on the New York Mercantile
Exchange's COMEX division shot up 7.15 cents, or 2.2 percent, to
settle at $3.3570 per lb, its highest level on a closing basis since
Jan. 25.

On the London Metal Exchange (LME), benchmark copper for
three-month delivery MCU3 peaked at $7,450 a tonne, another high
dating back to late January, before ending at $7,435 a tonne from a
last bid at $7,260 on Thursday.

Since collapsing to 3-1/2-month lows on Feb. 5, prices of the
metal used in power and construction have staged a spectacular
recovery, catching many industry players off-guard with gains of over
19 percent.

"I'm very surprised with its strength over the last two weeks,"
said Justin Lennon, analyst at Mitsui Bussan Commodities (USA) Inc.

"The macroeconomic indicators have been strong lately, and copper
has benefited from that, and expectations that China will be strong
coming out of holiday," he said, pointing to strong regional U.S.
manufacturing data this week.

Chinese market participants return next week from their week-long
Lunar New Year holidays.

Data on Friday showed U.S. consumer prices rose less than
expected in January, while prices excluding food and energy fell for
the first time since 1982, soothing worries over rising inflation.
[ID:nN18218950]

The dollar -- which hit a nine-month high versus the euro --
pared some of its gains after the inflation report, making dollar
priced metals slightly cheaper for non-U.S. investors. [USD/]

"The inflation data eased fears of monetary tightening but that's
also negative for the dollar, so the moves in metals have been
largely currency informed," said Daniel Major, analyst at RBS Global
Banking and Markets.

The U.S. Federal Reserve said late on Thursday it was raising the
interest rate it charges banks for emergency loans. Markets initially
took the decision as a signal that the U.S. central bank was coming
closer to tightening its benchmark rate, despite assurances from the
Fed to the contrary. [ID:nSGE61I036]

SIGNS OF STRENGTH

Also boosting copper, U.S. stock markets, seen by some as a proxy
for economic growth, advanced as investors saw the Fed's surprise
increase in the discount rate as a sign of strength in the economy.

But highlighting still weak demand outside China -- the world's
largest metals consumer -- latest LME data showed copper stocks fell
300 tonnes only to remain near six-year highs at 554,775 tonnes.

Aluminum MAL3 ended at $2,139 a tonne versus $2,114. LME
inventories for the metal, used in transport and packaging, eased
7,025 tonnes but remained near record levels at about 4.6 million
tonnes.

Also underpinning aluminum is a recent rise in canceled warrants
-- material earmarked for delivery from LME warehouses -- which
markets see as signaling an increase in demand.

On Thursday, aluminum canceled warrants were at 301,725 tonnes
compared with 243,175 tonnes on Jan. 19.

Among other base metals, steel making ingredient nickel MNI3
ended at $20,725 a tonne versus $20,450 a tonne, having earlier hit
its highest since mid-August last year at $20,735.

Battery material lead MPB3 finished at $2,359 from $2,319, zinc
MZN3 ended at $2,359 a tonne from $2,310 and tin MSN3 was last
bid at $16,995 from $17,050.

In industry news, miner Xstrata (XTA.L) may be forced to scale
back production or shut down some of its Mount Isa operations after
excessive lead levels were recorded by an air monitoring site, an
Australian official said. [ID:nLDE61I1H0]

Metal Prices at 2037 GMT
Metal Last Change Pct Move End 2009 Ytd Pct

move
COMEX Cu 334.25 5.70 +1.73 334.65 -0.12
LME Alum 2139.00 25.00 +1.18 2230.00 -4.08
LME Cu 7411.50 281.50 +3.95 7375.00 0.49
LME Lead 2355.00 36.00 +1.55 2432.00 -3.17
LME Nickel 20650.00 200.00 +0.98 18525.00 11.47
LME Tin 17000.00 -50.00 -0.29 16950.00 0.29
LME Zinc 2362.00 52.00 +2.25 2560.00 -7.73
SHFE Alu 16825.00 185.00 +1.11 17160.00 -1.95
SHFE Cu* 56410.00 1020.00 +1.84 59900.00 -5.83
SHFE Zin 18345.00 270.00 +1.49 21195.00 -13.45
* 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on
26/3/07
(Additional reporting by Maytaal Angel in London; editing by Sue
Thomas/Marguerita Choy)