Reuters reported that London copper traded lower as some investors liquidated positions to meet margin calls in Shanghai equities and Shanghai rebar futures which fell in the session.

An upcoming meeting of central bankers at Jackson Hole, Wyoming, on Friday also kept investors cautious as they await clearer trading cues on whether the United States Federal Reserve will launch new stimulus measures.

Mr Andy Du analyst of Orient Futures said that "When Shanghai equities fell and Shanghai rebars started plunging, copper got dragged down."

Three month copper on the London Metal Exchange had fallen 0.3% to USD 7,583.50 per tonne by 0353 GMT after easing 0.4% in the prior session, extending losses to a third session. The most active December copper contract on the Shanghai Futures Exchange slipped 0.4% to CNY 55,250 per tonne by the midday close after losing 0.7% on Tuesday.

Traders said that Shanghai copper prices were supported by a pickup in buying in physical markets as shown in the prompt September contract trading at a premium to forward months.

A Shanghai based physical trader said that "Traders have put more copper into ShFE warehouses to try to take advantage of Shanghai copper's forward curve backwardation."

Data shows a 2,787 tonne rise in copper stocks in ShFe monitored warehouses in the week to August 24th 2012.

Market players have been expecting more clarity from a meeting of central bankers at Jackson Hole, Wyoming, on Friday, on what the United States Federal Reserve will do to stimulate the economy and how the European Central Bank will tackle the bloc's credit crisis. But some are losing earlier optimism over Fed Chief Ben Bernanke's speech on Friday.

Mr Du said that sentiment is bearish, with some people questioning the effectiveness of stimulus measures by the U.S., even if they do manage to roll out such measures this week.

Hopes of more European stimulus being announced at Jackson Hole were also shattered after European Central Bank President Mr Mario Draghi said he would not attend the annual meeting because of a heavy workload as he gears up for a critical policymaking meeting on September 6th 2012.

Mr Draghi has faces mounting problems in the euro zone, as the Spanish economy is falling deeper into recession and depositors are pulling their money out of banks, while the country's most economically important region, Catalonia said it needed a major rescue from Madrid.

Loans to households in the euro zone fell in July reflecting weak domestic demand, while loans to companies ticked up only slightly, suggesting a credit squeeze persists despite ECB efforts to provide liquidity.