China's PMI boosts confidence metal use to rise * Caution remains because of euro zone debt crisis
* LME copper faces resistance at $7,689 -technicals KUALA LUMPUR, Jan 3 (Reuters) - London copper rose on Tuesday, the first trading day of the year, as an expansion in China's manufacturing boosted hopes that demand for industrial metals will increase, but investors remained cautious as Europe's debt crisis persists.
The metal posted its first annual decline in three years in 2011 when it lost a fifth of its value on fears related to the euro zone debt crisis and the global economic slowdown. China's official purchasing managers' index (PMI), compiled by the China Federation of Logistics and Purchasing on behalf of
the National Bureau of Statistics, rose to 50.3 in December from 49 in November. That indicated a slight expansion in business activity in the factory sector. "China's PMI number looks positive, better than most people had expected earlier on," said Huang Yiping, chief economist for emerging Asia at Barclays Capital in Hong Kong.
"But caution remains in the market. The euro zone economy is declining, it's in negative growth."The euro zone makes accounts for than 20 percent of China's export market, Huang said. Three-month copper on the London Metal Exchange climbed 0.73 percent to $7,655.25 a tonne by 0334 GMT, extending gains from the last trading session on Dec. 30. The Shanghai Futures Exchange is closed for a holiday.
Copper prices may be held up as workers at Freeport McMoran Copper & Gold Inc's Indonesia unit delayed their return after a three-month strike because 500 employees of sub-contractors lack job security. LME copper faces a resistance at $7,689 a tonne and only a rise above this could open the way to $7,887, according to Reuters technical analyst Wang Tao. Prices however continue to be weighed down as the drawn-out debt crisis in Europe clouds demand outlook.
Euro zone manufacturing activity declined for a fifth consecutive month in December, although at a slightly slower rate than November's 28-month record low, a survey showed on Monday, suggesting the decline would continue in the early months of 2012. The euro edged higher against the dollar and the yen on Tuesday but touched a record low versus the Australian dollar and looked set to remain under pressure in 2012 on worries over Europe's debt crisis.
In other markets, Asian stocks rose as the first trading day of 2012 brought renewed appetite for riskier assets, while U.S. crude jumped 1.5 percent to above $100 a barrel on escalating tensions between Iran and the West.