"The macro players in the market are now reassessing their bearish bets. They are reassessing the full-blown panic they experienced back in May and they are starting to put some positions back in," said one dealer at a New York trading house.
By 10:37 a.m. EDT (1437 GMT), copper for December delivery
Traders pegged first support at the $3.60 level, while initial resistance was seen at around the Aug. 10 high, near $3.70.
Spot September climbed 2.90 cents at $3.68 a lb.
COMEX copper volume at 10 a.m. EDT was estimated at 3,000 lots.
The Institute for Supply Management said its monthly non-manufacturing index, which measures the services sector of the economy, rose to 57.0 in August from 54.8 in July and above market expectations of 55.
A number above 50 indicates growth, while anything below 50 denotes contraction.
On Tuesday, COMEX copper futures rallied to a 3-1/2-week peak on a wave of new allocation of investment fund money at the start of September. Talk of a strengthening background of supply/demand fundamentals was also seen adding to the gains, traders said.
"For the base metals complex as a whole, further upside is expected as physical demand returns against a background of low stocks and tight supply," said John Reade, metals analyst with investment bank UBS.
High global copper cathode demand is likely in the near future, with China likely to increase imports, Norddeutsche Affinerie, Europe's largest copper producer, said on Tuesday.
Chile, the world's largest copper producer, was still facing contract negotiations for workers at state-owned Codelco.
"Should labor disputes follow ... this would again sharpen the supply situation in the market and again cause a price rise," the copper producer said in the report.
Meanwhile, the 25-day strike at Escondida, the world's largest copper mine, and a rockslide at another mine will have just a marginal impact on Chile's 2006 copper production, a top government copper official said on Tuesday.
Eduardo Titelman, executive vice-president of the Chilean Copper Commission (Cochilco), said he was maintaining his copper production outlook for the year, although a full study has yet to be done on the supply disruptions.[nN05389343]
Looking at supply, copper stocks at London Metal Exchange (LME) warehouses held steady at 128,275 tonnes on Wednesday, while COMEX inventories fell 246 short tons to 11,542 tons in Tuesday's report.
LME copper for three-month delivery last traded at $8,040 a tonne, up $120 from Tuesday's kerb close.
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