* Fresh asset allocation lifts metals
* Options-related buying boosts zinc -Triland
* Coming up; FOMC minutes at 1800 GMT (Adds comments, detail; updates prices)
By Melanie Burton
SYDNEY, July 9 (Reuters) - London copper prices edged up on Wednesday, hovering near their highest in almost five months, while aluminium matched a 13-month top underpinned by improving prospects for global growth and shrinking supply.
Copper prices have rallied more than seven percent since mid June to above the $7,000 a tonne mark, driven by a lack of supply and a cheerier chart picture that has encouraged fresh allocation by funds.
China’s moves to loosen monetary policy have also fed copper’s rally, which may stretch further after Wednesday’s relatively benign inflation data handed policy makers scope for fresh action, said Jonathan Barratt, chief executive of commodity research firm Barratt’s Bulletin in Sydney.
“CPI lower than expected indicates support for the story of stimulus. [Premier Li] has got room and money to move. And I think that’s been the core that over the last couple of weeks that has seen metals prices higher,” he said.
China’s annual consumer inflation came in slightly below market expectations in June, cooling to 2.3 percent from May’s 2.5 percent, leaving scope for more stimulus measures from Beijing as it tries to stabilise the economy.
China’s government has unveiled a series of modest stimulus measures in recent months to give a lift to economic growth, which dipped to an 18-month low of 7.4 percent in the first quarter, China’s slowest annual growth since the third quarter of 2012.
Three-month copper on the London Metal Exchange had gained 0.4 percent to $7,155 a tonne by 0747 GMT, from the previous session when it hit its highest since Feb. 19 at $7,212 a tonne. Prices are now inching towards the February top of $7,220, which would open the way to levels last seen in late January.
The most-traded September copper contract on the Shanghai Futures Exchange slipped by 0.1 percent to 50,930 yuan ($8,200) a tonne, with momentum falling short of fresh five-month peaks in overnight trade.
Dwindling copper supplies have underpinned prices.
Chile’s Codelco has asked certain buyers of refined copper in China to cancel some term shipments scheduled for delivery in the second half of the year as the firm processes less ores from a new mine, three sources said.
Also the head of Japan’s JX Nippon Mining & Metals Corp said the company now expects global refined copper market to see a deficit in 2014, versus earlier projections of a surplus, on strong demand and lower operating rates at smelters in top producer China.
Elsewhere, U.S. small business sentiment weakened in June, pulling back from a six-year high because firms felt less confident the economy would improve in the coming months.
Among other metals, LME aluminium looked set to hit a new 13-month peak after matching its top from Tuesday, while zinc was also approaching three-year highs above $2,300 tipped the session before. Shanghai zinc hit its highest in 17 months but Shanghai aluminium was steady.
Alcoa Inc has increased its estimate for the global aluminium market deficit this year due to capacity cuts in China, the world’s No. 1 producer, a senior executive said on Tuesday.
Zinc prices caught a lift on options-related purchases, broker Triland said.
“Volatility on zinc options has been well bid in recent days as upside calls for Dec. 14 in particular have been bought. This has echoes of similar strategies in nickel earlier this year.”
Three month LME copper
Most active ShFE copper
Three month LME aluminium
Most active ShFE aluminium
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin ($1 = 6.2010 Chinese Yuan Renminbi) ($1 = 6.1975 Chinese Yuan Renminbi) (Reporting by Melanie Burton; Editing by Joseph Radford, Richard Pullin and Subhranshu Sahu)