Copper at 3-week high on fund flows, China data

By Maytaal Angel and Harpreet Bhal

LONDON -- Copper prices surged to a three-week high on Tuesday, lifted by an expansion in manufacturing activity in the United States and China which boosted hopes that demand for industrial metals is likely to remain healthy.            

Three-month copper on the London Metal Exchange (LME) ended at $7,790 a tonne, its highest level in three weeks and up more than 2 percent from the previous session's close of$7,600 a tonne.  

Benchmark tin, lead aluminium and zinc also hit their highest intraday levels in roughly three weeks on the first day of trading for the year.          

The pace of growth in the U.S. manufacturing sector accelerated in December, its best month since June, according to the Institute of Supply Management (ISM).         

Earlier in the session, metals prices were supported by data showing China's official purchasing managers' index (PMI) rose to 50.3 in December from 49 in November, indicating a slight expansion in business activity in the factory sector.

"The year has started on a better footing than many in the market had feared so it is not surprising to see commodities up across the board on the back of supportive equity markets, a weak dollar and lower risk aversion," said Eugen Weinberg, head of commodity research at Commerzbank.            

The upbeat data lifted European shares and nudged the euro higher against the dollar, helping cement gains for metals prices. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies.     

But the longer-term market outlook for the rest of the year remains shaky, with all eyes on policymakers' efforts to resolve the euro zone debt crisis.        

"It will depend on whether the debt crisis calms down or whether investors remains jittery, (which) would be negative for metals," said Peter Fertig, consultant at Quantitative Commodity Research.      

The metal, used in power and construction, posted its first annual decline in three years in 2011 when it lost a fifth of its value on fears related to the euro zone debt crisis and the global economic slowdown.Designers Sneakers