LONDON: Copper prices bounced on Monday as hopes for stimulus in top consumer China and inventory data showing stocks were likely to fall triggered a buying flurry ahead of US inflation numbers due this week.

Traders said that buying on the London Metal Exchange (LME) to take advantage of lower prices than those on the Shanghai Futures Exchange (ShFE) was also behind copper’s gains.

Benchmark copper on the LME was up 1.2% at $9,102 a metric ton at 1602 GMT. That compared with prices around $10,250 a ton on ShFE, helping to create what is known as arbitrage trade.

“Arb buying is providing impetus and Chinese inflation data has got people thinking about stimulus again,” one metals trader said, adding that the US inflation report on Wednesday would be a factor in any interest rate decision at next week’s US Federal Reserve meeting.

Fed rate cuts would help to boost economic activity and demand and weigh on the U.S currency, making dollar-priced metals cheaper for holders of other currencies.

Latest data showed that Chinese producer price deflation worsened in August, reflecting a struggling economy.

Stocks of copper in LME-approved warehouses are at about 316,450 tons, near five-year highs.

However a rise in cancelled warrants, metal earmarked for delivery, to about 11% of total stocks means that copper inventories are likely to slide.