* Mine supply issues ease oversupply concerns for copper-Argonaut
* Coming Up: Fed releases statement after policy meet at 1800 GMT (Adds late prices, details)
By Melanie Burton
MELBOURNE, July 29 (Reuters) - London copper jumped on Wednesday as short sellers rushed to cover their positions amid speculation about further stimulus from China, and ahead of a policy decision from the U.S. Federal Reserve.
Asian shares clung to modest gains on Wednesday on pledges Beijing would buy more shares if needed, while caution ruled elsewhere before the Fed ends a two-day policy meeting later on Wednesday with markets divided on whether it will take a hawkish or dovish stance.
Three-month London Metal Exchange copper gained 0.28 percent to $5,312.50 a tonne by 0742 GMT, climbing $12.50 above the previous session's close.
Shanghai Futures Exchange copper surged 2.49 percent to 39,090 yuan ($6,297) a tonne.
Traders said the rally was sparked by short-covering.
"The market always going to be prone to a short-covering rally, but it will most likely fail all things being equal ... what has (fundamentally) changed?" said a broker in Hong Kong.
The China Securities and Regulatory Commission (CSRC) said it was investigating share dumping incidents on Monday, when Chinese markets suffered their worst single-day plunge in more than eight years.
Market attention was turning to a Federal Reserve meeting later in the day for clues about the timing of a rate rise, which market consensus has pegged at September.
"If the rate rise continues to be pushed out, the USD would presumably weaken a little bit and that would help commodities," said analyst Daniel Morgan of UBS in Sydney. "But that's not our base case scenario."
U.S. consumer confidence suffered its biggest blow in four years in July on a less upbeat jobs outlook, while home appreciation in major cities stalled in May, suggesting a spring pause in housing demand.
Copper's fragile supply pipeline was back in the spotlight, offering support to prices.
A week-long strike by Codelco contract workers in Chile briefly stopped work at its second-largest copper mine on Tuesday, while analysts said Freeport-McMoRan Inc FCX.N may have to cut output at its small North American copper and molybdenum mines to help it reduce costs.
"News flow on supply disruptions we believe eased market concerns on global oversupply," said Argonaut Securities in a note.
Elsewhere in Chile, Antofagasta ANTO.L cut its full-year copper production guidance to 665,000 from 695,000, citing delays at its Antucoya mine. ID:nL5N10919B
Gains in copper helped to spur a broader advance on the ShFE, as zinc SZNcv1 , tin SSNcv1 , lead and nickel SNIcv1 , SPBcv1 all rallied around 3 percent.
Nickel was also helped by signs of declining supply.
Canada's Sherritt International S.TO reduced its 2015 nickel production target to 78,000-82,000 tonnes from 80,000-86,000 tonnes, while Australia's Mincor MCR.AX is cutting output by up to 56 percent over the six months to end-December. ID:nL3N1085BT ID:nL3N1091GX
PRICES
Three month LME copper
CMCU3
Most active ShFE copper
SCFcv1
Three month LME aluminium
CMAL3
Most active ShFE aluminium
SAFcv1
Three month LME zinc
CMZN3
Most active ShFE zinc
SZNcv1
Three month LME lead
CMPB3
Most active ShFE lead
SPBcv1
Three month LME nickel
CMNI3
Most active ShFE nickel
SNIcv1
Three month LME tin
CMSN3
Most active ShFE tin
SSNcv1
($1 = 6.2079 Chinese yuan renminbi)