LONDON- Copper retreated on Wednesday as investors cashed in on a rally that took prices to an eight-month peak after doubts set in over a U.S.-China trade deal.

U.S. Treasury Secretary Steven Mnuchin said tariffs will remain after a Phase 1 trade deal signing later on Wednesday, but President Donald Trump could consider easing them if China moves quickly to seal a second agreement. 

"People have come back to reality about the trade wars. Also some people probably want to liquidate and take profit at this stage and see how it goes after the signing later today," said Wenyu Yao, senior commodities strategist at ING Bank in London.

Benchmark copper on the London Metal Exchange snapped a seven-session winning streak, having gained 9% at its peak on Tuesday since early December.

"Since December, prices have been running ahead of real fundamentals. In the short term it's hard to justify prices based on a recovery of real demand," she added.

Three-month LME copper had declined 0.7% to $6,261 a tonne by 1057 GMT.

"The physical market will slow down before the Lunar New Year and most end users will stop buying from next week until ... February," said Fred Gu, a vice-president at Bayin Resources, referring to a week-long holiday in China starting Jan. 24.

 

* LEAD: LME lead climbed 1.5% to a seven-week high of $1,977 a tonne as bearish investors closed out positions, according to Yao.

"People have been shorting lead because of the spread between primary and secondary (metal), shorting the margins, but now it's a bit overdone and the market is on a correction path."

* STOCKS: Copper inventories in LME-approved warehouses fell to a fresh 10-month low of 128,050 tonnes, helping to cushion the price decline.

However, copper stocks in China's Shanghai-bonded warehouses rebounded slightly in January to 265,000 tonnes, from a record low of 244,000 tonnes in December, Shanghai Metals Market monthly data showed.

* COPPER SPREAD: The discount of LME copper cash to the three-month contract expanded to a three-month high of$32 a tonne on Tuesday, suggesting no nearby shortage of the metal. It was at $31.25 on Wednesday.

* CONGO: The Democratic Republic of Congo's state mining company Gécamines on Wednesday opened the Deziwa copper and cobalt mine and processing plant. 

* PRICES: LME aluminium dipped 0.2% to $1,806 a tonne, nickel rose 0.3% to $13,885 a tonne, zinc shed 0.1% to $2,372 and tin climbed 0.6% to $17,540, the highest since Sept. 12.

($1 = 6.8875 Chinese yuan renminbi)

(Additional reporting by Mai Nguyen in Singapore; editing by Emelia Sithole-Matarise) ((eric.onstad@thomsonreuters.com; +44 20 7542 7093; Twitter https://twitter.com/reutersEricO; Reuters Messaging: eric.onstad.thomsonreuters.com@reuters.net))