BEIJING, Oct 26 (Reuters) - London copper prices retreated by more than 1 percent on Friday, wiping out Thursday's gains from a sharp drop in inventories, as concerns over the impact of a U.S.-China trade row on demand for industrial metals returned to focus. The metal had risen 0.8 percent in the previous session after on-warrant LME inventories - those not earmarked for delivery - slid to their lowest since December 2005. "Cancelled warrants and orders to remove inventories from LME warehouse have climbed 20 percent in the past two days," ANZ said in a note on Friday. Despite falling stocks, London copper is down 1 percent for the week, after shedding 1.3 percent in the week ended Oct. 19, while open interest in Shanghai copper has fallen to its lowest since February 2017. "Demand is not very good, stocks are rising and the market does not have confidence at this time," despite a pledge of support from the Chinese government, a broker said. FUNDAMENTALS * LME COPPER: Three-month copper on the London Metal Exchange fell 1.2 percent to $6,154 a tonne by 0451 GMT. * SHFE COPPER: The most-traded December copper contract on the Shanghai Futures Exchange rose as much as 1.3 percent before trimming gains to 0.4 percent by the end of the morning, when it stood at 49,950 yuan ($7,176.52) a tonne. * OPEN INTEREST: Market open interest on Shanghai copper fell to 495.476 lots on Thursday, the lowest since Feb. 9, 2017, in a sign that money is leaving the market. * OTHER METALS: The rest of the base metals complex was lower, with ShFE nickel slipping 1 percent. Shanghai lead was the only other metal to buck the trend, gaining 1 percent on falling stocks. * VALE: Brazil's Vale, the world's top iron ore producer, is expecting major improvement in the performance of its base metals division in 2020 but said that production cuts would remain in effect this year and next while prices remain low, executives said on Thursday.