* US building permits signal improved construction activity
* Chinese equities give economic sentiment boost
* Reuters base metal price survey [ID:nLDE66J0ES] (Changes headline, updates with New York closing copper price, adds New York dateline/byline and analyst comments)
By Chris Kelly and Michael Taylor
NEW YORK/LONDON, July 20 (Reuters) - Copper rallied 2 percent on Tuesday as another large withdrawal from London stockpiles and unexpectedly strong building permit numbers in the United States pointed to improved demand prospects.
"The permits were the shining light within the housing numbers," said David Meger, vice president and director of metals trading with Vision Financial Markets in Chicago, referring to a mixed housing report that showed applications for building permits unexpectedly climbed 2.1 percent, signaling a potential pickup in home construction activity. [ID:nN20249501]
"Any sign of demand down the road is going to have a positive effect on the market," he said.
Copper for September delivery HGU0 on the COMEX metals division of the New York Mercantile Exchange jumped 6.35 cents, or 2.2 percent, to end at $3.0015 per lb, near the upper end of its $2.9315 to $3.0165 session range.
On the London Metal Exchange, copper for three-month delivery CMCU3 closed up $129 at $6,637 a tonne.
Analysts also pointed to the near-steady decline in London warehouse inventory levels as a sign of improving demand conditions.
Copper inventories fell 3,250 tonnes to 419,600 tonnes, down from near seven-year highs at 555,075 tonnes touched in mid-February. <0#LME-STOCKS>
"Stocks keep falling, they're falling quite significantly, it's looking pretty favorable," David Thurtell, an analyst at Citi, said.
Sentiment has been given a boost by recent builds in canceled warrants -- material earmarked for future delivery -- which were equivalent to nearly 8 percent of total stocks.
Copper, which fell to a two-week low at $6,470 on Monday, looks set to come under further pressure from a lull in demand during the northern hemisphere summertime and from sovereign debt problems in the euro zone, analysts said.
The metal, seen as a gauge of economic activity, is forecast to average $7,496 a tonne next year from $7,500 in January, a biannual Reuters survey showed. [ID:nLDE66J0ES]
Chinese equities, often seen as an indicator for economic activity, boosted industrial metals, after Shanghai's benchmark stock index .SSEC jumped 1.6 percent to break the 2,500 level. China is the world's top metals consumer.
"There is demand for spot metal but the problem is that the market is trading with equities, which is dominating sentiment," said Andrey Kryuchenkov, analyst at VTB Capital. "Towards the end of the third quarter and towards the end of the summer, people will be paying much more attention to fundamentals."
Aluminum CMAL3 closed down $47 at $1,971 per tonne. LME stocks for the metal used in transport and packaging rose 48,275 tonnes to 4.41 million tonnes.
A large portion of those aluminum stocks are tied up in finance deals. [ID:nGEE5BA277]
For the latest data from the International Aluminum Institute, click [ID:nLDE65R0UZ] [ID:nWLA8774]
Nickel CMNI3 gained $325 to end at $19,125, tin CMSN3 rose $295 to $18,240, near its session peak at $18,300, its highest since early May.
Lead CMPB3 firmed $62 to $1,837 a tonne and zinc CMZN3 ended up $67 at $1,875 a tonne. Metal Prices at 1920 GMT Metal Last Change Pct Move End 2009 Ytd Pct
move COMEX Cu** 301.40 7.60 +2.59 334.65 -9.94 LME Alum 1975.00 -43.00 -2.13 2230.00 -11.43 LME Cu 6665.00 157.00 +2.41 7375.00 -9.63 LME Lead 1815.00 40.00 +2.25 2432.00 -25.37 LME Nickel 19040.00 240.00 +1.28 18525.00 2.78 LME Tin 18075.00 130.00 +0.72 16950.00 6.64 LME Zinc 1860.00 52.00 +2.88 2560.00 -27.34 SHFE Alu 15030.00 120.00 +0.80 17160.00 -12.41 SHFE Cu* 53060.00 740.00 +1.41 59900.00 -11.42 SHFE Zin 15450.00 290.00 +1.91 21195.00 -27.11 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Rebekah Curtis in London; editing by Keiron Henderson, Sue Thomas and Jim Marshall)