(Updates prices) By Melanie Burton MELBOURNE, Feb 5 (Reuters) - London nickel climbed on Monday after posting its largest daily loss in two months in the session before, but prices were seen tailing off ahead of the Lunar New Year next week. "Aside from the strengthening dollar, we think concerns about China's weak demand (have) also weighed on the nickel price," said broker Argonaut Securities in a report. Some of China's stainless steel mills, the major consumers of nickel, are losing money at current prices and have already wound down their operations, it said. "Looking into February, a week long Chinese Lunar New Year will further dampen production and demand. More steel plants are expected to arrange care and maintenance therefore production of stainless steel is expected to contract further," it said. "We expect to see price weakness in nickel going forward." FUNDAMENTALS * NICKEL: London Metal Exchange Nickel cut early losses to trade up 0.4 percent, paring Friday's 4 percent plunge that was also fanned by expectations of a glut due to growing nickel ore exports from Indonesia. Shfe nickel was down 2 pct. * COPPER: LME copper firmed by 0.7 percent amid a flat-to-lower complex. It traded at $7,090 a tonne by 0727 GMT. Prices dropped 1 percent on Friday when they hit the highest in a week at $7,188.50 before falling into the close. On the Shanghai Futures Exchange where prices have trended lower since late December, copper stayed down by 0.3 percent at 53040 yuan ($8,425) a tonne. * US ECONOMY: U.S. job growth surged in January and wages increased further, recording their largest annual gain in more than 8-1/2 years, bolstering expectations that inflation will push higher this year as the labour market hits full employment. * PERU PRODUCTION: Higher supply overhung the market after Peru, the world's No. 2 copper and zinc producer, reported a substantial rise in production. Copper production grew 3.9 percent to 2.4 million tonnes and zinc production surged by 10.2 percent to 1.5 million tonnes. * LEAD: Lead prices took a breather from a 6-1/2-year top of $2,685 from Friday to tail back by 0.7 percent. * ALUMINIUM: Russian aluminium maker Rusal said on estimated that China's winter capacity cuts will curb output by 1 million tonnes annually. * INVESTORS: Hedge funds and money managers cut their net long position in COMEX copper in the week to Jan. 30, U.S. Commodity Futures Trading Commission (CFTC) data showed. * MARKETS: Asian share markets stumbled on Monday as fears of resurgent inflation battered bonds, toppled Wall Street from record highs and sparked speculation central banks globally might be forced to tighten more aggressively. * COMING UP: Euro zone Retail sales for Dec at 1000 GMT PRICES BASE METALS PRICES 0709 GMT Three month LME copper 7091 Most active ShFE copper 53040 Three month LME aluminium 2208 Most active ShFE aluminium 14315 Three month LME zinc 3514.5 Most active ShFE zinc 26805 Three month LME lead 2659.5 Most active ShFE lead 19535 Three month LME nickel 13500 Most active ShFE nickel 102230 Three month LME tin 21660 Most active ShFE tin 150100 BASE METALS ARBITRAGE LME/SHFE COPPER LMESHFCUc3 1109.29 LME/SHFE ALUMINIUM LMESHFALc3 -1773.19 LME/SHFE ZINC LMESHFZNc3 500.41 LME/SHFE LEAD LMESHFPBc3 -613.58 LME/SHFE NICKEL LMESHFNIc3 1508.1 ($1 = 6.2958 Chinese yuan renminbi) (Reporting by Melanie Burton; Editing by Sunil Nair and Vyas Mohan)
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