* Chinese zinc spreads 'screamingly bullish' - Citi
* China zinc premiums top $200/t - BOCI
* Global equities slide as Italy stress grips Europe again
By Maytaal Angel
LONDON, Oct 2 (Reuters) - Zinc hit its highest in nearly two months on Tuesday on falling stockpiles and rising Chinese premiums or surcharges for the physical metal, though gains were capped by signs that growth in China is cooling.
Zinc inventories in Shanghai Futures Exchange warehouses ZN-STX-SGH are at more than decade lows while premiums in Shanghai, at above $200 a tonne, have hit their highest since November 2013, according to Bank of China International (BOCI).
"Refined zinc production in China has been low because of the smelter cuts (but) the demand side (is) not very robust either," said Xiao Fu, head of Commodity Market Strategy at BOCI.
BOCI expects more downside pressure in base metals this year due to continued macro economic headwinds, but sees limited downside in metals like zinc and copper given current inventory levels.
"We could see (more) buy on dips emerging," said Fu.
PRICES: Three-month zinc on the London Metal Exchange CMZN3 fell 0.5 percent to $2,643 a tonne by 1018 GMT, having hit its highest since early August at $2,660.50. LME zinc has risen around 15 percent since mid-September.
"Chinese zinc spreads are screamingly bullish – running at around their most backwardated level in a decade... likely driven by a combination of Chinese smelter output cuts and consumer stocking," Citi said in a note.
"Our base case is that (zinc) tightness in China is likely to spread to ex-China once the Chinese market is back from holiday and LME Week begins next week. We raise our fourth quarter forecast to $2,650 a tonne from $2,500."
WIDER MARKETS: Global equities went south after anti-euro comments from an Italian party official weighed on the single currency, boosted the dollar and dampened risk appetite. MKTS/GLOB
CHINA: Growth in China's manufacturing sector sputtered in September as both external and domestic demand weakened, two surveys showed on Sunday, confirming consensus views that the world's second-largest economy is continuing to cool. Traders expect subdued activity this week due to Chinese holidays.
CANADA: Canada, buoyed by a last-minute continental trade deal it sealed with the United States and Mexico, is pressing Washington to remove steel and aluminium tariffs, senior Canadian officials said on Monday. Premiums for Japanese aluminium shipments for the October to December quarter were set at $103 per tonne, down 22 percent from the previous quarter, as Asian spot premiums fell amid ample supply, four sources directly involved in the pricing talks said. Top Base and Precious Metals Analysis - GFMS
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