Aluminium edges higher on hopes for China demand, Greek deal

Base metals edged higher on Wednesday on hopes that demand would recover in China and that Greece would eventually agree a bailout with creditors.

There was also some buying by investors who took profits from short positions over the past two days when some metals hit multi-year lows and others who saw the low prices as good value.

Metals joined euro zone stocks and peripheral bonds in climbing after a report that Greece was ready to accept most conditions from its international creditors.

"There's a recognition that even in the worst scenario, if Greece leaves the euro zone, it's not necessarily going to have a deep negative impact on global growth, which is ultimately what commodities are interested in," said Caroline Bain, senior commodities economist at Capital Economics.

Three-month aluminium on the London Metal Exchange was up 0.9 percent to $1,706 a tonne by 0956 GMT while copper rose 0.4 percent to $5,789.

Activity in China's manufacturing sector expanded slightly in June, not as much as expected but offering some signs that the world's second-largest economy may be starting to level out after a series of support measures.

There were also bright spots elsewhere in the region, with indications that big Japanese companies planned to raise spending at their fastest pace in a decade.

"Although the data wasn't particularly encouraging on China, it's not getting any worse. And given the loosening we've had, both monetary and fiscal, there perhaps is the expectation that things could start to pick up," Bain said.

Prices were capped, however, with uncertainty on many fronts, said analyst Jonathan Barratt, chief investment officer at Ayers Alliance in Sydney.

"Lower commodity prices are telling us the same story - during summer, demand isn't there. And until we get some further clarification on Greece, consumers aren't going to be convinced about spending money."

Tin was the biggest mover, climbing 1.3 percent to $14,100 after sliding 3.3 percent on Tuesday.

"The tin market shows few signs of tightness yet and the current macro environment is not propitious," said Stephen Briggs, metals strategist at BNP Paribas in London.

"But we do think that in a longer-term context the LME price is unsustainably low."

Nickel gained 0.5 percent to $12,040 a tonne. On Tuesday it traded as low as $10,795 a tonne, its weakest since April 2009, before clawing back losses to end slightly higher.

Tuesday's price swings came after the Shanghai Futures Exchange announced it would accept global brands for delivery against its contract, freeing up supply.