Bareksa.com - London copper fell to its lowest level in two weeks on Wednesday and Shanghai prices slid nearly 1 percent, reflecting investor caution as weakness in China's services sector cast doubts on its economic recovery momentum.

A slower economy may hurt China's appetite for copper and other base metals at a time when global supply is rising.

Growth in China's services sector, which includes the copper-intensive property segment, slowed in July to its lowest level since November 2005, data showed on Tuesday, in contrast with recent surveys showing a strong manufacturing sector.

Three-month copper on the London Metal Exchange touched a session low of $7,035.25 a tonne, its cheapest since July 23, before paring losses to trade nearly flat at $7,049.25 by 0327 GMT.

Copper fell 1 percent on Tuesday, its biggest single-day fall in more than two weeks, after the China services data that analysts said point to the property sector slump.

China's once-hot housing market has slowed this year as sales and prices turned south in their biggest pullback in two years, driven in part by the cooling economy and by the national government's nearly five-year-long campaign to keep price rises in check.

But China's plan to speed up infrastructure investment in the second half may help offset the slowdown in the property sector, said Helen Lau, senior metals analyst at UOB-Kay Hian Securities in Hong Kong.

"We should not be too bearish because the outlook for demand in the second half is good," said Lau, who is looking at revising up her 2014 average price forecast of $6,866.

China on Monday reiterated that it will increase investment in areas including the property sector, while authorities will advance wide-ranging economic reforms such as changing the fiscal and pricing systems.

The most-traded October copper contract on the Shanghai Futures Exchange dropped 0.9 percent to 50,110 yuan per tonne, after hitting a one-week trough of 49,990 yuan.

China's refined copper imports fell 8.2 percent from a year ago to 255,041 tonnes in June despite recent robust manufacturing data.

"It may indicate that even as underlying economic data in China improves, the growing scrutiny on China's copper financing trade may weaken China's apparent copper demand and keep copper prices under pressure," Commonwealth Bank of Australia said in a note.

As global banks and trading houses fire off lawsuits over their estimated $900 million exposure to a suspected metal financing fraud in China, the tangled legal battle to recoup losses is set to drag on for years and hinder a swift recovery in metal trade.

Pointing to slower demand and with recent tightness in domestic supply easing, premiums for copper in bonded warehouses in Shanghai slipped to a low of $85 a tonne on Wednesday from $105 a month ago, said UOB-Kay Hian's Lau.

In other metals, LME aluminium dropped 0.4 percent to $2,005.25 a tonne and zinc eased 0.6 percent to $2,365, pulling further away from a three-year peak of $2,416 reached last week.

In Shanghai, zinc was down 1.1 percent at 16,880 yuan a tonne and lead fell 1.4 percent to 14,765 yuan. (Source : Reuters)