Copper snaps 4-day rally ahead of central bank meetings

* Eyes on ECB policy-setting meeting on Thursday

* Dollar rises as euro falls ahead of ECB meeting

* BHP likely to delay decision on Olympic Dam mine expansion

By Chris Kelly and Susan Thomas

NEW YORK/LONDON, July 30 (Reuters) - London copper prices fell for the first time in fives days on Monday as investors weighed the likelihood of further stimulus measures later this week from the European Central Bank and U.S. Federal Reserve.

Both the ECB and the Fed are set to meet this week. The Fed will start a two-day meeting on Tuesday, with many economists believing the central bank will wait until September to provide more stimulus to a faltering U.S. economic recovery. The ECB's policy-setting meeting on Thursday is receiving more of the markets' attention after the bank's chief, Mario Draghi, pledged last week to do everything to save the euro.

But translating his words into action are particularly important given the threat the long-running euro zone crisis poses to the global economy.

Bold action by the ECB is at least five weeks away, insiders told Reuters.

"People have got fed up with the thinking that rhetoric from the ECB is enough," Standard Chartered analyst Dan Smith said.

"The ECB has to be more aggressive to turn things around. Draghi talking about it was enough to give the market a lift but that doesn't last very long. People want to see action rather than words."

London Metal Exchange (LME) three-month copper shed $19 to end at $7,549 a tonne. Copper is set to close the month down more than 2 percent, after shedding more than 13 percent from the year's high hit in February.

In New York, the COMEX September contract fell 1 cent to settle at $3.4160 per lb, after dealing between $3.4025 and $3.4555.

Copper fell alongside the euro as traders cashed in on the gains registered last week and as the dollar rose against a basket of currencies. A stronger dollar makes commodities less expensive for holders of other currencies.

CHINA

Compounding the headline-driven results from both the ECB and Fed meetings this week is economic data from top commodities consumer China.

On Wednesday, China will release its official manufacturing sector index, which will be scoured for more evidence that loosening steps taken by Beijing in the past few months have filtered down to the real economy, helping stimulate growth and metals demand.

The index may have inched up to 50.3 in July from 50.2 in the previous month, reinforcing signs that the world's second-largest economy is stabilising due to increased policy support.

Analyst Walter de Wet at Standard Bank in London expected the Chinese PMI to come in higher than expected at 50.7, which could spur some short-covering. "However, we maintain that the upside for industrial commodities remains capped and that rallies should fade," he said in a note.

Positive signs emerged earlier this month that China's steps were having an effect after a preliminary indicator showed manufacturing output in July grew at its fastest pace in nine months.

China is the world's biggest copper consumer, accounting for 40 percent of refined copper demand last year. But demand so far in 2012 has been lacklustre as the world's second biggest economy grapples with a slowdown in its export markets.

From a fundamental viewpoint, however, there are arguments for copper prices rising in the longer term, Commerzbank said in a research note.

That includes reports that BHP Billiton is likely to put on hold a decision on a $30 billion proposed expansion of its Olympic Dam mine in South Australia.

"Given the difficult market environment, other mine producers can likewise be expected to postpone projects, which in the medium and long term will strip supply from the market," Commerzbank said.

Metal Prices at 1732 GMT
                                                                  
  Metal            Last      Change  Pct Move   End 2011   Ytd Pct
                                                              move
  COMEX Cu       342.25       -0.95     -0.28     343.60     -0.39
  LME Alum      1899.00       20.50     +1.09    2020.00     -5.99
  LME Cu        7542.00      -26.00     -0.34    7600.00     -0.76
  LME Lead      1951.00       26.00     +1.35    2035.00     -4.13
  LME Nickel   16245.00      370.00     +2.33   18710.00    -13.17
  LME Tin      18265.00      165.00     +0.91   19200.00     -4.87
  LME Zinc      1862.00        3.00     +0.16    1845.00      0.92
  SHFE Alu     15445.00      -35.00     -0.23   15845.00     -2.52
  SHFE Cu*     55000.00       40.00     +0.07   55360.00     -0.65
  SHFE Zin     14620.00      -10.00     -0.07   14795.00     -1.18
 ** Benchmark month for COMEX copper
 * 3rd contract month for SHFE AL, CU and ZN
 SHFE ZN began trading on 26/3/07