METALS-LME copper edges up; growth worries cap gains

* Traders see Shanghai bonded copper stocks around 530,000T
* ShFe copper backwardation hits highest in one month
* Coming Up: U.S. non-farm payrolls July; 1230 GMT

(Adds detail, updates prices)
By Melanie Burton
SINGAPORE, Aug 3 (Reuters) - London copper edged up on
Friday, but prices were still set for their biggest weekly loss
in two months after European Central Bank inaction disappointed
markets and as worries over global growth dragged on the outlook
for metals.
Commodity prices fell on Thursday and copper hit six-week
lows after ECB President Mario Draghi failed to offer immediate
action to shore up the fragile euro zone economy which the
market had expected to come via an announcement of large scale
bond purchases.
That followed a string of dismal manufacturing sector
reports from China, Europe and the United States this week, with
only a small gleam of improvement seen in China's small- and
medium-sized private sector companies.
China accounted for more than 45 percent of global
commodities demand, and 40 percent of refined copper consumption
last year, and infrastructure spending is expected to lend some
support to copper prices.
"Of course the export market is one of the driving forces of
the Chinese economy, but don't forget about China's
infrastructure investment plans," said commodities analyst
Bonnie Liu of Macquarie in Singapore.
"We are quite constructive about the Q4 outlook. We see
lower prices as a buying opportunity. Demand is slowly but
steadily improving," she added.
China will hike railway spending by 64 billion yuan ($10
billion) to 580 billion yuan in 2012, the Ministry of Railways
said this week, updating an investment plan published this
month.
Three-month copper on the London Metal Exchange
traded at $7,360 a tonne by 0707 GMT, up 0.42 percent from the
previous session, when it hit its lowest since June 22.
Prices have dropped about 3 percent so far this week, on
track for their biggest weekly decline in two months.
The most-traded November copper contract on the Shanghai
Futures Exchange slipped 1.01 percent to close at
54,100 yuan ($8,500) a tonne.
The European Central Bank indicated on Thursday it may
again start buying government bonds to reduce crippling Spanish
and Italian borrowing costs but the conditions it set and the
dissenting voice of its key German member disappointed markets.
ECB President Mario Draghi indicated that any intervention
would not come before September -- and only if governments
activated the euro zone's bail-out funds to join the ECB in
buying bonds.
Share markets also steadied. European stocks inched higher
in early trade on Friday, halting the previous session's sharp
pull-back, as investors await U.S. jobs data that could
potentially fuel expectations of further stimulus from the
Federal Reserve.
The U.S. non-farm payrolls data, due later in the day, is
likely to show job growth picked up slightly in July, not enough
to change expectations of more help from the Federal Reserve to
stimulate the faltering economy.

MARKETS NEWS
There were signs of renewed interest in Shanghai copper
with rising premiums for nearby material against that further
forward.
The August contract traded 500 yuan higher than the
November contract at the close.
Still, a Shanghai-based trader said there was not a huge
uptick in enquiries from users of metal.
"Fundamentals are not really showing much improvement in the
last couple of weeks. Domestic inventories are only slowly
declining, so it doesn't really give a lot of support for prices
to rally further," he said.
Two industry sources said they saw stockpiles in bonded
warehouses in China at around the 530,000-tonnes mark, down
from an estimate of 550,000 tonnes in early June.

ANZ pointed to the potential for further price falls ahead,
based on chart analysis.
"We see potential for further weakness, down towards
USD7,250 based on chart patterns, but fundamentals are more
neutral," ANZ said in a research note.
PRICES

Base metals prices at 0707 GMT
Metal Last Change Pct Move YTD pct chg
LME Cu 7360.75 30.75 +0.42 -3.15
SHFE CU FUT NOV2 54100 -550 -1.01 -2.28
HG COPPER SEP2 332.20 3.15 +0.96 -3.32
LME Alum 1851.00 7.00 +0.38 -8.37
SHFE AL FUT NOV2 15295 -20 -0.13 -3.47
LME Zinc 1825.00 13.00 +0.72 -1.08
SHFE ZN FUT NOV2 14570 00 +0.00 -1.52
LME Nickel 15450.00 200.00 +1.31 -17.42
LME Lead 1869.75 15.75 +0.85 -8.12
SHFE PB FUT 14860.00 -45.00 -0.30 -2.78
LME Tin 17600.00 170.00 +0.98 -8.33
LME/Shanghai arb^ 592

Shanghai and COMEX contracts show most active months
($1=6.3674 Chinese yuan)

(Editing by Clarence Fernandez and Himani Sarkar)