Copper claws higher on hopes for a moderate Fed

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LONDON, Jan 26 (Reuters) - Copper prices clambered higher on Wednesday as investors bet the U.S. central bank would not raise rates too quickly, allowing economic growth and metals demand to keep increasing.

Three-month copper on the London Metal Exchange had gained 1.6% to $9,955 a tonne by 1715 GMT, building on its 0.8% rise in the previous session.

The U.S. Federal Reserve is expected on Wednesday to signal plans to raise interest rates in March as it focuses on fighting inflation. read more

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"The mood on markets has changed overnight and I think it's because most market players think the Fed will deliver this evening, but will not over-deliver," said analyst Daniel Briesemann at Commerzbank in Frankfurt.

"If the Fed acts in a moderate manner, the economy will still continue recovering from its COVID low in 2020, and this supports metals demand in general."

The upbeat mood lifted equity markets, while oil touched $90 a barrel for the first time in seven years on tension between Russia and Ukraine.

In China, the most-traded copper contract on the Shanghai Futures Exchange finished up 1.3% at 70,730 yuan ($11,192) a tonne.

* Signs of near-term physical demand in China, however, were not as rosy. The Yangshan copper premium was last at $62 a tonne, the lowest since August last year and down from $88 a month ago.

* LME aluminium rose 0.2% to $3,099 a tonne after climbing by 2.1% on Tuesday on worries that Russia-Ukraine tension would hit supply.

Al Munro at broker Marex said in a note the market was expecting sanctions to be imposed on Russia, but there was not as much scope for gains as in 2018 when prices surged to seven-year highs. "In contrast to the 2018 impact ... the market is already at elevated levels."

* LME zinc advanced 1.2% to $3,615 a tonne, nickel climbed 2% to $22,785, tin gained 2.7% to $42,500 while lead was little changed at $2,335.

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($1 = 6.3196 yuan)

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Reporting by Eric Onstad Editing by Jan Harvey, Mark Potter and Aditya Soni

Our Standards: The Thomson Reuters Trust Principles.