* Stainless steel mills seen buying nickel on dips-Triland

* Zinc perched on 200-day moving average, weakness seen-trader

* Coming Up; Germany Ifo business climate at 0900 GMT

(Adds comment, detail, updates prices)

By Melanie Burton

SYDNEY, March 25 (Reuters) - London copper edged up to its highest in nearly a week on Tuesday, with the market supported by hopes China will act to support its economy after a survey showed manufacturing contracted in the first quarter.

Prices have slid to a stop near last week's three-and-a-half year lows, with traders watching developments in China's credit markets for directional cues, after a bond default by a solar panel maker sparked fears defaults could grow.

"Copper is a little bit in pause mode at the moment - much of the physical buying has been done on the way down and there seems to be very little interest at these levels," said analyst Mark Keenan of Societe Generale in Singapore.

"Speculators are slightly concerned about entering the markets here, especially with yesterday's soft PMI data. People are watching for any signs of fresh defaults, but also for the official PMI stats out next week" he said.

Three-month copper on the London Metal Exchange CMCU3 climbed 0.9 percent to $6,530.50 a tonne by 0711 GMT after closing the previous session little changed. It earlier rose to $6,580 a tonne, the highest since March 19, when it rebounded from its lowest in three-and-a-half years at $6,321 a tonne.

The most-traded June copper contract on the Shanghai Futures Exchange SCFcv1 rallied by 1.4 percent to 45,890 yuan ($7,400) a tonne.

China's manufacturing engine contracted in the first quarter of 2014, a preliminary private survey showed on Monday, raising market expectations of government stimulus to arrest a loss of momentum in the world's second-largest economy this year.

ID:nL4N0ML0CG

China's yuan logged its biggest daily gain in nearly 30 months on Monday, also boosted by speculation the Chinese government may soon unveil stimulus measures to support the faltering economy. ID:nL3N0M40XQ

Credit concerns are on the radar, with the focus on Hong Kong where banks have ramped up lending to China from near zero a few years ago to $430 billion, fuelling concerns about their credit exposure to the mainland. ID:nL3N0M40XQ

In other news, worries about Russian sanctions on nickel exports are underpinning prices and tempering risk sentiment.

U.S. President Barack Obama and major industrialised allies warned Russia on Monday it faced damaging economic sanctions if President Vladimir Putin takes further action to destabilise Ukraine following the seizure of Crimea. ID:nL6N0MI2ZM

"Dips are being supported by stainless mills whose clients seem to have been caught out by the speed of this move up in the nickel price," said broker Triland in a note.

In other metals, zinc prices CMZN3 , which hit a three-and-a-half month low on Monday, found support on Tuesday at the 200-day moving average, an important chart signal, but remained vulnerable to further selling, a trader said.

"While we could see a bounce off this level tomorrow, the metal has now posted declines for 11 of the last 12 trading sessions and further weakness would open the way towards $1,900."

In news, Indonesia's top tin miner, PT Timah TINS.JK , said it expects the global tin supply deficit to grow to 20,000 tonnes in 2014 from 7,400 tonnes in 2013 as shipments continue to suffer from rules making tin trading on an Indonesian bourse compulsory. ID:nL4N0MM184

PRICES

Three month LME copper CMCU3

Most active ShFE copper SCFcv1

Three month LME aluminium CMAL3

Most active ShFE aluminium SAFcv1

Three month LME zinc CMZN3

Most active ShFE zinc SZNcv1

Three month LME lead CMPB3

Most active ShFE lead SPBcv1

Three month LME nickel CMNI3

Three month LME tin CMSN3

($1 = 6.1888 Chinese Yuan)

(Reporting by Melanie Burton; Editing by Richard Pullin and Subhranshu Sahu)

((melanie.burton@thomsonreuters.com)(+612 9373 1803)(Reuters Messaging: melanie.burton.thomsonreuters.com@reuters.net)) 

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