* Falling bulks prices seen dousing metals
* China factory activity seen expanding in April, due May 1
* Coming Up: U.S. Q1 GDP advance at 1230 GMT (Updates prices)
By Melanie Burton
MELBOURNE, April 28 (Reuters) - London copper cut early gains on Thursday after a commodity exchange in China tightened trading terms for iron ore and coal, dousing their recent rally in a move that also hit sentiment for other metals.
The Dalian Commodity Exchange took further steps to calm volatile markets on Wednesday, hiking transaction fees and widening trade limits in a move that could make exiting futures contracts more orderly.
The Dalian exchange’s recent series of new rules on trading are aimed at curbing speculation and cutting market risks, the Chinese exchange said in a statement on Thursday.
Bulk commodities such as iron ore and coal are usually seen as leading indicators for metals such as copper, a barometer of health for the global economy.
A rally in bulks as China boosted credit access earlier this year ignited investor sentiment towards the sector.
“This is a correction to test whether or not there are good healthy bids at the lower end,” said chief investment officer Jonathan Barratt of Ayers Alliance.
“The bulks commodities are leading sentiment into other commodities.”
Three-month copper on the London Metal Exchange was down 0.1 percent at $4,897.50 tonne by 0750 GMT. The metals slipped to $4,873 in the previous session, the weakest since April 19.
Shanghai Futures Exchange copper fell 1.2 percent to close at 37,250 yuan ($5,746) a tonne.
“(Dalian) open interest on iron ore is going down quickly as well, a sign of people throwing in the towel, I think,” said a commodities trader in Singapore.
“I expect ShFE to show a similar pattern.”
Iron ore futures in China regained some footing on Thursday after losses as the Dalian exchange stepped up measures to combat speculative froth behind a recent market surge.
Dalian coking coal fell by the 6 percent, maximum allowed by the exchange, for a second straight session on Thursday.
Elsewhere, there was little pressure coming from the dollar after the Federal Reserve left interest rates unchanged on Wednesday.
Looking ahead, activity in China’s manufacturing sector likely expanded modestly in April for the second month in a row, a Reuters poll showed, adding to hopes that a prolonged downturn in the world’s second-largest economy is easing.
World No.1 copper exporter Chile is expected to produce 5.77 million tonnes of the metal in 2016 and prices for the industrial metal are seen averaging $2.15 a pound for the year, state copper commission Cochilco said on Wednesday.
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 ($1 = 6.4825 Chinese yuan) (Reporting by Melanie Burton; Additional reporting by Manolo Serapio Jr in Manila; Editing by Ed Davies and Sherry Jacob-Phillips)