LONDON, Feb 20 (Reuters) - Copper prices advanced on Tuesday after China cut mortgage rates, but gains were capped as investors wait for more support for the economy of the world's top metals consumer.
Three-month copper on the London Metal Exchange was up 0.6% at $8,481.50 per metric ton by 1040 GMT. LME copper has rebounded 4.4% since touching the lowest in nearly three months on Feb. 9.
China announced its biggest ever reduction in the benchmark mortgage rate on Tuesday, cutting the five-year loan prime rate by 25 basis points.
"Cutting mortgage rates more than expected is clearly a good thing, but people are looking for more action from the central bank," said Ole Hansen, head of commodity strategy at Saxo Bank in Copenhagen.
"I think the market is also waiting for earnings reports from the mining companies to get a clear view on how they see the outlook."
Analysts have forecast a copper deficit from this year on signs that supply may not be as robust as previously thought after Panama ordered the closure of First Quantum's 350,000-ton mine and producers such as Anglo American and Vale Base Metals lowered annual guidance.
LME aluminium fell 0.6% to $2,184.50 a ton after LME
inventories rose to a six-week high of 564,675 tons.
The short-term outlook for aluminium was weak after it broke below the key technical level of $2,200, Hansen said.
Metals also got support from a weaker dollar index, making dollar-priced metals less expensive for buyers using other currencies.
With China's return from the Lunar New Year holiday break, traders and analysts will be looking for demand clues over the coming weeks amid prospects of a pick-up in construction activity as winter draws to an end.
Among other metals, LME nickel rose 0.3% to $16,405 a ton while zinc eased 1% to $2,378.50, lead dipped 0.2% to $2,038.50 and tin was little changed at $26,425.
For the top stories in metals, click (Reporting by Eric Onstad; editing by David Evans)