* Cancelled copper warrants climb
* GRAPHIC-2018 asset returns: tmsnrt.rs/2jvdmXl (Adds ShFE arb, closing prices)
By Zandi Shabalala
LONDON, Aug 24 (Reuters) - Copper rose on Friday, clocking its first weekly gain in four on a softer dollar, though worries about Chinese demand are expected to cap gains as the country’s trade dispute with the United States drags on.
Benchmark copper on the London Metal Exchange (LME) rose 2 percent to close at $6,105 a tonne, up nearly 3 percent for its biggest weekly gain since early June.
The dollar index eased by 0.6 percent after Federal Reserve Chairman Jerome Powell defended the U.S. central bank’s push to raise interest rates. A weaker dollar makes commodities priced in the greenback cheaper for holders of other currencies.
“It’s a dollar story again today, but from a demand point of view it is a little more constructive than it was a few weeks back,” said ING commodities strategist Warren Patterson.
“The trade war is going to create volatility in the market but generally the trend should be higher metal prices.”
TRADE: U.S. and Chinese officials ended two days of talks on Thursday with no major breakthrough as their trade war escalated with activation of another round of duelling tariffs on $16 billion of each country’s goods.
The tariffs have sapped demand for metals this year.
CHINA INTERVIEW: China will keep retaliating as more U.S. trade tariffs are imposed, but its counter-strikes will remain as targeted as possible to avoid harming businesses in China, both Chinese or foreign, Finance Minister Liu Kun told Reuters.
COPPER SPREADS: The discount for the cash contract to 3-month copper has narrowed to $19 a tonne from $42 last week because of worries about metal for nearby delivery on the LME market because of a rise in cancelled warrants for delivery. MCU0-3
STOCKS: Cancelled warrants in LME-approved warehouses have risen above 100,000 tonnes for the first time this year, representing about 39 percent of LME copper stocks. MCUSTX-TOTAL
SHFE ARBITRAGE: Traders say the cancelled metal is heading for China because prices on the Shanghai Futures Exchange are about $7,150 a tonne and the gap against LME prices is large enough to cover shipping, taxes and make a profit.
CHINA PREMIUMS: China copper import premiums SMM-CUYP-CN are at $86 a tonne, their highest since October 2017.
LEAD: The price of lead rose to its highest since Aug. 14 at $2,086, on course for its best week in three months.
PRICES: Aluminium closed with a 1 percent gain at $2,095 a tonne, zinc finished 2.7 percent up at $2,534, lead rose 1.5 percent to $2,085, tin ended 0.5 percent down at $18,995 and nickel added 1.1 percent to $13,415.
Additional reporting by Tom Daly Editing by David Goodman