By Manolo Serapio Jr. MANILA (Reuters) - London copper erased early losses to trade higher on Tuesday and Shanghai prices cut losses as positive economic data and upbeat corporate earnings raised the prospect of a recovery for economies mired in recession. "The market is buoyed by an overall upbeat market sentiment resulting from positive macroeconomic data and earnings reports," said Yingxi Yu, analyst at Barclays Capital. Data released on Monday showed U.S. new home sales posted their biggest monthly gain in eight years in June, suggesting the housing market may be starting to recover from its worst slump since the Great Depression of the 1930s. Asian stocks jumped to a 10-month high on improved corporate earnings. "I still think there's a chance that we'll see copper prices pull back over the course of the coming quarter but the sentiment in the market at present is quite bullish," said commodity strategist David Moore at Commonwealth Bank of Australia. "There's nothing that's likely to significantly turn that sentiment around." Three-month copper on the London Metal Exchange rose $20 to $5,620 a tonne by 0710 GMT, closing in on near 10-month high levels it touched on Monday. LME aluminium gained $15 to $1,841 per tonne. "A large volume of the metal is being tied up in financing deals, kept by physical players in warehouses, and this will keep aluminium prices firm," said an analyst with a global commodity company. "When prices are high enough to incentivise these financing deals to be broken, then the market would be facing less upside pressure," the analyst added. Shanghai's third month copper closed down 0.3 percent at 44,850 yuan a tonne, off a day-low of 44,510 yuan. The most-active November contract dropped 100 yuan to 44,830 yuan. "I think the current pricing reflects expectation of international economic recovery over the next year," said Commonwealth Bank's Moore. "Demand from China has been very important in sustaining metal prices and will remain so," he added. The world's top consumer of many industrial metals, China's aggressive buying had pushed up copper prices by 84 percent in London and 88 percent in Shanghai so far this year, although many analysts say the volume of Chinese commodity imports should ease considerably during the second half. China's record imports of refined copper and nickel continued in June but UBS said the sharp increase was a "very temporary shock." "The surprising upsurge in import volumes largely reflects the suddenness of the Chinese macro turnaround...and the unprecedented explosion of liquidity in the mainland economy over the past nine months," USB said in a note. "Neither of (these) two factors is expected to continue for long," it said, citing the sharp rise in inventory levels and the slowdown in new lending in the second half. | 
