China's SRB bought 235,000 T copper; Beijing halts buying
* Copper likely to test previous highs despite weak demand
* Econ data from U.S. and China due this week

London copper rose 1 percent on Monday, supported by lower stocks and increasing net length, while Shanghai copper edged down, following confirmation that Beijing had suspended its stockpiling.

China's state reserves buying has helped drive London copper prices up 66 percent this year. But Beijing said it had stopped buying after prices surged and middlemen cashed in on an initiative meant to support domestic industry, a senior government official was quoted as saying on Monday.

"The announcement is unlikely to have much impact on the market. It's all within expectations -- the SRB bought earlier, and stopped buying after prices rose. Only if the SRB sells, will it impact the market," said Li Rong, an analyst with Great Wall Futures.

Although the copper demand outlook is expected to be soft over the summer -- the traditional low season -- inventories in warehouses registered with the London Metal Exchange continue to fall, and open interest has increased in recent weeks thanks to the building of new long positions.

"LME open interest has been rising over the past week and indeed over the past month, while prices have been rising, suggesting that the building of new long positions has been the main driver of prices," said Macquarie Bank in a note.

For the moment, bullish bets look to be on the money with London copper heading for a 26 percent rise in the second quarter, after gaining 32 percent in the first three months of the year.

Aluminium is on its way to its biggest increase since the first quarter of last year, while zinc is on track for its biggest gain since the last quarter of 2006.

Copper for three-month delivery on the London Metal Exchange rose nearly 1 percent to $5,085 a tonne by 0701 GMT, after touching $5,125.

"In the short term, copper may still move up to test previous highs, but the attempt is only supported by technical indicators, such as growing open interest, falling stocks and the strength in the rebound last week," said Zeng Chao, an analyst with Everbright Futures.

Shanghai's benchmark third-month copper futures contract settled at 40,280 yuan a tonne, down 0.3 percent.

Some question whether the strength in copper could be sustained, given uncertainties over the economy.

"I think there will be very limited movement in prices this week until we see the data," said David Moore, commodities strategist at the Commonwealth Bank.

Sentiment may also soften as China's copper imports, which hit successive record highs in previous months due to high domestic prices, are halting at the border after a collapse in Shanghai's premium over world market prices.

Currently LME copper is trading around 400 yuan above the domestic prices, accounting for China's 17 percent VAT, making imports unprofitable.

On the macro-front, a flood of economic indicators this week will keep the market on its toes.

Data includes China's Purchasing Managers Index on Wednesday, U.S. consumer confidence on Tuesday and U.S. June job figures and manufacturing data on Thursday to gauge if the economy is on a path to sustainable recovery. Base metals prices at 0701 GMT Metal Last Change Pct Move End 2008 Pct chg 09 LME Cu 5085.00 50.00 +0.99 3060.00 66.18 SHFE Cu* 40280.00 -110.00 -0.27 23840.00 68.96 LME Alum 1650.00 3.00 +0.18 1535.00 7.49 SHFE Alum* 13420.00 -105.00 -0.78 11540.00 16.29 COMEX Cu** 229.85 0.50 +0.22 139.50 64.77 LME Zinc 1585.00 4.00 +0.25 1208.00 31.21 SHFE Zinc 13440.00 -105.00 -0.78 10120.00 32.81 LME Nickel 15775.00 -25.00 -0.16 11700.00 34.83 LME Lead 1715.00 0.00 +0.00 999.00 71.67 LME Tin 14605.00 -190.00 -1.28 10700.00 36.50 LME/Shanghai arb^ 378 Dollar/yuan 6.8339 \ 6.8342 ** 1st contract month for COMEX copper * 3rd contact month for SHFE aluminium, copper and zinc ^ LME 3-m copper in yuan, including 17 pct VAT, minus SHFE third month