LONDON, Feb 26 (Reuters) – Copper steadied on Tuesday as traders paused for breath a day after hitting eight-month peaks amid dwindling stockpiles and signs of progress in U.S.-China trade talks. Available or “on-warrant” London Metal Exchange copper stocks fell to just 29,775 tonnes, the latest data from the exchange showed, marking their lowest levels since July 2005. Investors are less fearful that the U.S.-China trade spat will hurt growth after U.S. President Donald Trump deferred plans at the weekend to hike tariffs on Chinese goods.  “The market was focussed on the dollar, Chinese data and the trade deal and, on all three, people have become a bit more confident,” said Michael Widmer, analyst at Bank Of America Merrill Lynch. He added that with copper mine supply tight, disruptions escalating and demand set to hold up, he is forecasting a small deficit this year, and an average third quarter price of $6,750 a tonne.

* COPPER PRICE: Three-month copper on the London Metal Exchange was flat at $6,478 a tonne by 1145 GMT, after ending fractionally higher in the previous session, when it hit $6,540 a tonne, the highest since July 4.

* DOLLAR: The dollar held near a one-week low against its rivals ahead of testimony from Fed Chairman Jerome Powell. A weaker dollar makes dollar priced metals cheaper for non-U.S. investors.

* POSITIONS: LME data showed one entity holds more than 90 percent of copper cash contracts and warrants <0#LME-WHC>. This has pushed cash copper to a premium of $44.50 versus the three-month price CMCU0-3.

* CHINA DATA: Factory activity in China is expected to have contracted for the third month in a row in February, a Reuters poll showed, adding to evidence of a further slowdown in the economy in the first quarter.

* PERU: Chinese miner MMG Ltd said on Monday it will have to delay some shipments of copper concentrate from Matarani Port in Peru due to a blockade by an indigenous community.

* TECHNICALS: LME copper may break a resistance at $6,525 per tonne and rise to $6,662 in a week, as suggested by its wave pattern and a projection analysis.

* OTHER METALS: Zinc, used to galvanise steel, was up 0.3 percent at $2,727.50 a tonne, the only gainer on the LME metals suite. LME zinc stocks fell by 8,925 tonnes to 69,475 tonnes, the lowest since October 2007, data showed.