Copper, aluminium hit 1-month highs on index buying

By Anna Stablum

LONDON (Reuters) - Copper and aluminium hit one-month highs on Wednesday boosted by the re-balancing of major commodity indices, but demand still looked poor, analysts said.

"The reweighting is helping some markets, nickel in particular," said analyst Dan Smith at Standard Chartered.

"There also seems to be more risk appetite around at the beginning of this year as well," Smith said.

Three-month copper on the London Metal Exchange rallied 5.3 percent to a one-month high of $3,570 a tonne in early trade, a gain of more than 16 percent from the end of 2008.

But demand fears were still present because of rising inventories and weakening demand after copper's heavy fall in value, down more than 50 percent last year.

By 1016 GMT copper prices -- often seen as a key gauge of real economic activity -- had eased back to $3,462, up 2.1 percent against Tuesday's close at $3,390.

The benchmark March copper contract on the Shanghai Futures Exchange was suspended after it hit its upside limit for three consecutive days, chasing the New Year surge in London.

The Dow Jones AIG index is adding weight to copper and some other metals traded on the New York Mercantile Exchange's COMEX division and the reweighting takes place from January 9 to 15.