METALS-Copper ends up in rebound from 1-week low; eyes on China

* Goldman Sachs issues buy recommendation for Sept aluminum

* Euro hovers near two-year low on economic concerns

* Investors worry expansion flagging in China

* Coming up: Alcoa earnings results at 4 pm EDT

By Chris Kelly and Melanie Burton

NEW YORK/LONDON, July 9 (Reuters) - Copper rose for the first time in three days on Monday, recovering from an earlier dive to a one-week low on hopes for more monetary easing by central banks, including in top metals consumer China.

While weaker than expected Chinese inflation data and a report showing Japanese machinery orders fell at a record pace in May further darkened the global growth outlook, industrial metal investors bet that China could ease policy further to stimulate growth in the world's second-largest economy.

China's annual consumer inflation came in at 2.2 percent, a lower rate than the 3.0 percent in May, which left room for Beijing to ease policy without stoking upward price pressures.

But investors were expected to remain cautious ahead of Chinese GDP data later this week, which is likely to show the weakest expansion in three years.

"Chinese inflation data showed a drop, so that might allow more easing to take place without causing inflationary pressures. More negative might be the GDP numbers since we had a rate cut last week." Societe Generale analyst Robin Bhar said.

London Metal Exchange (LME) three-month copper closed 0.4 percent higher at $7,560 a tonne versus a last bid of $7,530 a tonne on Friday.

Earlier in the day, copper sank to its lowest since June 29 at $7,486 and was not far from a six-month low at $7,219.50 it touched on June 22.

Copper prices have erased gains of more than 12 percent to trade in negative territory for the year.

COMEX copper for September delivery rose 2.20 cents to settle at $3.4315 per lb after dealing between its own one-week low at $3.3965 and $3.4345.

Volumes slowed to just 33,500 lots in late New York business, nearly a quarter below the 30-day norm, according to preliminary Thomson Reuters data.

Matthew Zeman, head of trading with Kingsview Financial in Chicago, said COMEX copper's ability to hold and build some upward momentum away from the 20-day moving average near $3.41 could signal a further advance in the coming days, barring any macro developments.

"We could see a little bit more of a bounce, but that's going to be data-dependent. At this point everybody is looking for more easing ... (but) if the market doesn't get any clues about easing soon, there's going to be more downside in the future," he said, forecasting a sell-off back down to the June lows near $3.25 to $3.30.

In the United States, a top Federal Reserve official said the bank was prepared to do more to bring down unemployment, setting the scene for possible further easing, and European Central Bank President Mario Draghi kept the door open to further interest rate cuts.

ALUMINUM ATTRACTS

A build-out of social housing in China's eastern provinces suggests metals, many of which are near their 2012 lows, represent value on a six-to-12-month time horizon, Goldman Sachs said in a note on Monday.

"We expect that a pick-up in Chinese activity, moderate U.S. growth and a build-out of social housing will support metals from current levels ... prices across the complex generally present value to consumers ... assuming European 'containment'," it said.

The bank issued a buy recommendation for Sept 2012 aluminum call options, in particular, given the expected pick-up and its view that aluminum prices are low by historical standards.

"We believe aluminum calls are a good way to express our constructive view on aluminum ... A less leveraged way to trade this view would be to open a long September aluminum futures position with 15 percent upside to our forecast of $2,200/T," it said.

Aluminum gained 1.5 percent to finish at $1,925 a tonne from a last bid of $1,896 a tonne on Friday.