October 1, 2015 / 2:41 AM / 5 years ago

METALS-Copper up as China PMI sparks stimulus hopes, short-covering

* Glencore shares rally after Citi affirms buy rating

* Little upside for nickel prices in 2015 on stock overhang -ANZ

* Coming up: EZ Markit mfg final PMI at 0800 GMT (Adds comment, detail; updates prices)

By Melanie Burton

MELBOURNE, Oct 1 (Reuters) - London copper climbed on Thursday as a gauge of China’s factory activity showed the country’s economy deteriorating in September, sparking short-covering in holiday-thinned trade.

Factories in Asia cut more jobs and throttled back output in September as domestic and export demand shrivelled, adding to fears that cooling growth in China and emerging markets will jeopardize an increasingly fragile global recovery.

China’s factory activity fell to a more-than-6-year low in September while growth in the once-resilient services sector came close to stalling, fueling fears that the economy may be slowing more sharply than expected.

Traders are now pinning their hopes on sector-specific stimulus from Chinese authorities to shore up its manufacturing, after investors took heart from a rash of measures announced this week targeting the auto sector.

Three-month copper on the London Metal Exchange had climbed 1 percent to $5,211.50 per tonne by 0730 GMT, amid light short-covering that sent prices to the highest in more than a week.

Prices jumped 3.8 percent on Wednesday as investors closed bearish positions, but still ended the quarter with a loss of 10.5 percent - their weakest quarterly performance in more than two years.

“Expect nothing. The Chinese don’t even know what to expect for the fourth quarter,” said a trader in Singapore.

The Shanghai Futures Exchange was closed on Thursday for a week of national holidays.

Japanese big manufacturers’ confidence worsened in the three months to September and companies were cautious on the outlook, a central bank survey showed, as they felt the pinch from volatile financial markets and slumping shipments to China.

Reviving sentiment towards base metals, Glencore’s shares surged more than 7 percent after broker Citi retained a buy rating, saying the company could cover its debts.

Meanwhile, the LME moved on Wednesday to tackle concerns about the potential abuse of its proposed queue-based rent capping (QBRC) rules by metal owners to get free storage at LME-registered warehouses.

Japan’s aluminium premiums for October-December shipments were set at $90 per tonne, down for a third straight quarter due to higher domestic inventories and weaker overseas rates, five sources directly involved in the talks said on Wednesday.

China appears to be taking advantage of low nickel prices and high inventories to restock, said ANZ in a note. The bank sees global stockpiles at more than 1 million tonnes due to weak demand and a lack of producer discipline.

“The scenario of a looming deficit in 2016 supporting prices looks unlikely ... we now expect little upside in prices in 2015.”

LME nickel prices have shed 31.5 percent this year, standing around $10,370 a tonne on Thursday.

PRICES

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

Most active ShFE nickel

Three month LME tin

Most active ShFE tin

Reporting by Melanie Burton; Editing by Joseph Radford and Sunil Nair

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