METALS-Copper prices ease; Fed meeting, China rebound in focus

(Updates prices)

By Mai Nguyen

Jan 31 (Reuters) - Copper prices dropped on Tuesday after traders exercised caution ahead of an eventful week that will include central bank meetings and as physical demand in top consumer China remained stagnant.

Three-month copper on the London Metal Exchange was down 1% at $9,115 a tonne by 0807 GMT, while the most-traded March copper contract on the Shanghai Futures Exchange dipped 0.7% to 69,240 yuan ($10,254.13) a tonne.

The U.S. Federal Reserve's Federal Open Market Committee (FOMC) is due to end its two-day meeting on interest rates on Wednesday.

Interest rate announcements are due on Thursday from the Bank of England and the European Central Bank - and both are expected to hike rates by 50 bps.

"Markets are weaker because of FOMC and they appear weak because of the run-up while China was on break," said a metals trader.

Traders are also squaring some positions ahead of the U.S. non-farm payroll data due on Friday.

"It's taking risk off the books when it's such a binary incident," the trader added.

However, SHFE copper still posted a 5% gain in January, and LME copper is on track for the third monthly rise, backed by a weaker U.S. dollar, rising inflows from funds and hopes that Chinese demand for the metal will improve following the removal of its strict COVID-19 restrictions.

China's manufacturing activity swung back to growth in January, beating expectations, as a wave of COVID-19 infections passed through the country faster than expected.

However, physical demand of copper in China remained tepid.

LME aluminium fell 1.1% to $2,561.50 a tonne, zinc declined 1.3% to $3,402.50 a tonne, tin shed 2.7% to $29,000 a tonne, and lead eased 0.7% to $2,133 a tonne.

SHFE aluminium eased 0.8% to 18,925 yuan a tonne, tin declined 2% to 233,940 yuan a tonne, lead eased 0.5% to 15,210 yuan a tonne while zinc rose 0.1% to 24,300 yuan a tonne.

SHFE nickel was up 1.5% at 222,540 yuan a tonne. Earlier in the session, it hit 224,140 yuan a tonne, its highest in nearly four weeks, as the Philippines considered taxing nickel ore exports.

For the top stories in metals and other news, click or ($1 = 6.7524 yuan) (Reporting by Mai Nguyen in Hanoi; Editing by Sherry Jacob-Phillips and Uttaresh.V)