* GRAPHIC-2019 asset returns: tmsnrt.rs/2jvdmXl (Updates with closing prices)
By Eric Onstad
LONDON, July 31 (Reuters) - Lead rebounded from a two-week low on Wednesday after the metal mainly used for batteries came under pressure from a pile-up of inventories and better supply prospects.
Prices recovered as some investors closed out short positions on the last day of the month, a trader said.
The lead market surged 14% over three weeks earlier this month before hitting a four-month peak on July 25, reflecting smelter closures and decade-long lows touched by London Metal Exchange-registered stocks.
But the situation has reversed in recent days as signs emerged that supply was healthy, sending prices lower.
"All the signals are pointing to better supply on the market," said analyst Daniel Briesemann at Commerzbank in Frankfurt, noting that the Port Pirie smelter had restarted, resolving a major outage.
"The price rise was somewhat excessive, partly driven by speculation, so lead was ripe for a correction."
LME benchmark lead hit an intraday low of $1,981.50, the weakest since July 17, before recovering to rise 0.6% to $2,010 a tonne in final open outcry trading.
Markets were on edge ahead of a second set of Chinese factory data due on Thursday and an expected U.S. interest rate cut later on Wednesday.
* LEAD STOCKS: Lead inventories in LME-registered warehouses MPBSTX-TOTAL surged by 11,725 tonnes to 79,050 tonnes, daily data showed on Wednesday, bringing the two-day rise to 42%.
* LEAD: Korea Zinc had secured inventories ahead of refinery maintenance being carried out until late August, so supplies will not be interrupted, a spokesman said.
* TRADE TALKS: U.S. and Chinese negotiators wrapped up a brief round of trade talks on Wednesday that both sides described as "constructive", including discussions over further Chinese purchases of American farm goods and an agreement to reconvene in September.
* CHINA PMI: China's factory activity shrank for the third straight month in July, with the official Purchasing Managers' Index (PMI) at 49.7 in July, slightly firmer than June's 49.4 and higher than expectations.
* "This shows that stimulus measures announced previously are having some positive impact on the manufacturing sector," said analyst Helen Lau of Argonaut Securities.
* FED: The U.S. Federal Reserve is almost certain to cut interest rates for the first time in more than a decade on Wednesday.
* ALUMINIUM TIME SPREADS: The discount of cash aluminium to the three contract CMAL0-3 has sunk to $28.50 a tonne, the lowest since June 18 and compared to a discount of $14 three weeks ago, indicating healthier near-term supply.
* PRICES: LME three-month copper fell 0.4% to end at $5,927 a tonne, aluminium slipped 0.2% to $1,800, zinc dropped 0.7% to $2,444 and tin shed 0.9% to $17,300. Nickel failed to trade in closing rings and was bid up 0.8% at $14,480.
* For the top stories in metals and other news, click or (Additional reporting by Mai Nguyen in Singapore Editing by Mark Heinrich)