* Speculators' net short positions rise to 32,000 lots from 10,000
* Bottlenecks force Chinese copper importers to queue
* Markets eye U.S. nonfarm payrolls for Fed policy clues
By Susan Thomas and Harpreet Bhal
LONDON, July 3 (Reuters) - Copper prices rose to their highest level in two weeks on Wednesday, spurred by bottlenecks in supply, increased purchases by Chinese importers in June and upbeat U.S. labour market data.
Copper has pared some of June's steep losses as mine shutdowns have combined with limited delivery from London Metal Exchange-registered warehouses to choke immediate supply.
The metal bucked the trend in other financial markets, with stocks in Europe sliding as deepening political turmoil in Portugal threatened to reignite the bloc's crisis.
Three-month copper on the LME last traded at $6,993 a tonne, up from a close $6,915 on Tuesday. Earlier in the day it reached $6,999, its highest level since June 19.
Copper lost more than 7 percent in June and prices are down more than 12 percent in the year to date.
"We had this long wave in which everyone was quite bearish about the outlook, panicking about China," Standard Chartered analyst Dan Smith said, adding that a recent visit to Hong Kong has reinforced his view that prices would rise by the year-end.
"We've seen a decent bounce in copper in the last few days, in line with that view," he said.
Smith sees copper at $7,000 plus before the end of the year, with Chinese base metals demand in reasonably good shape.
Also, China's copper importers are being forced by bottlenecks in the LME warehousing system to queue for deliveries of metal they have already bought, resulting in spot copper import premiums rising by a third since mid-June.
However, growth in China's services sector expanded only modestly in June, in a sign that the economy is cooling.
Helping gains was data showing U.S. private employers stepped up hiring in June and new applications for unemployment benefits fell for a second straight week last week, pointing to improving labour market conditions.
U.S. non farm payrolls, due on Friday, is expected to be the main focus for markets this week, with economists polled by Reuters expecting payrolls to have risen by 165,000 in June.
"If the payroll number is stronger than the 165,000 expected, we could see a rather sharp selloff in a host of commodities, including metals, as the dollar will strengthen and boost expectations that the Fed will scale back its bond buying program, come September," said Ed Meir, analyst at INTL FCStone.
"However, we think the jobs number will come in either in-line or slightly lower than forecast, implying that the Fed may not start tapering immediately."
In copper short selling, Macquarie said that over the past three weeks speculators' positioning had moved from net short 10,000 lots on June 11, to net short 32,000 lots on June 25.
"This has surpassed the previous record short position of 28,000 lots recorded during the depth of the global financial crisis in February 2009," Macquarie said in a research note.
Aluminium was last bid down 1.42 percent at $1,806 a tonne, zinc last traded down 1.43 percent at $1,865 a tonne, and lead last traded down 0.07 percent at $1,865 a tonne.
Tin last traded down 0.74 percent at $20,075 a tonne and nickel last traded down 1.32 percent at $13,855 a tonne.