* Zinc hits two-month low on expectated higher supplies
* Copper cancelled warrants near 27 percent
* GRAPHIC-2019 asset returns: (Updates with closing prices)By Pratima DesaiLONDON, May 7 (Reuters) - Copper prices fell on Tuesdaytowards 2-1/2 month lows hit last week on worries about demandafter U.S. President Donald Trump said he would raise tariffs onChinese goods before U.S-China trade talks.Benchmark copper on the London Metal Exchange ended0.9 percent down at $6,180 a tonne. Prices of the metal usedwidely in power and construction last week fell to $6,150, itslowest since Feb. 15."The sell-off on the LME is a delayed reaction to Trump'scomments over the weekend about higher tariffs," one coppertrader said, adding that a break of the 200-day moving averagearound $6,190 had fuelled downward momentum.
TRADE: Trump on Monday slammed China over its tradepractices, saying the United States was losing billions toBeijing and vowing to protect American commerce as tensionescalated. Over the weekend Trump had said he would ratchet up tariffson $200 billion worth of imports from China, the world's largestconsumer of industrial metals.TALKS: Chinese Vice Premier Liu He will visit the UnitedStates this week for trade talks, Beijing said on Tuesday,playing down the sudden increase in tensions. INTL FCStone analyst Edward Meir said the process of"revamping U.S.-China trade flows" would be complex and throw upmany challenges. "These now seem to be emerging and potentiallycould be severe enough to sink a deal altogether," he said.INVENTORIES: Rising stocks in LME-approvedwarehouses were also weighing on copper. At 230,075 tonnes,stocks have more than doubled since the middle of February.
Partly offsetting that rise are cancelled warrants -- metalearmarked for delivery -- at nearly 27 percent of the total."Funds trade on the headline stocks change, they don't lookat the picture underneath," one copper industry source said.STIMULUS: China's central bank on Monday said it will cutreserve requirement ratios to release about 280 billion yuan
($41.4 billion) for some small and medium-sized banks in a moveintended to help companies struggling in the face of an economicslowdown. ZINC: Prices of the metal used to galvanise steel fell 2.9percent to $2,692 a tonne, having touched a two-month low of$2,690 on concern over Chinese demand and rising supplies in thesecond half of the year as smelters restart and expand capacity.
"We see being short zinc as the best way to hedge a tradewar," Citi analysts said in a note.
"Zinc's near-term window of tightness would slam shut onfurther global demand weakness and the LME positioning data workwe have done suggests that zinc is by some distance the mostlong of all base metals."PRICES: Aluminium gained 1.1 percent to $1,816, lead lost 1.2 percent to $1,855.5, tin was bid up 0.3percent to $19,375 and nickel was bid 1.1 percent lowerat $12,050.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^Top Base and Precious Metals Analysis - GFMS ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Pratima DesaiEditing by Edmund Blair and David Goodman)