SHANGHAI, Oct 20 (Reuters) - Shanghai copper surged as much as 3.4 percent on Monday as a turnaround in equities and fresh government pledges to shore up the private sector injected cautious optimism into the market, but slowing growth in China kept investors on edge.

Copper prices have tumbled by a third in the past three weeks as fears of a world-wide recession sent markets into a tailspin.

A fall in China's annual GDP growth to 9.0 percent in the third quarter from 10.1 percent in the second quarter, and a drop in factory output to a six-year low, added to bearish sentiment, showing demand in the world's largest consumer of the metal had slowed.

The soft economic outlook prompted Deutsche Bank to slash is commodity forecasts, slicing nearly 40 percent from its 2009 forecast for copper to just $4,161.

"We now expect global GDP growth to slow to 1 .2 percent in 2009. We expect energy and industrial metals will be the major casualties in this environment," the bank said.

The report added aluminium could fall 16 percent from current prices to average $1,874 next year and nickel would average $10,279, 43 percent down from the previous forecast.

But it wasn't all doom and gloom. Fragile sentiment got a boost after the head of the European Central Bank on Sunday pledged to do whatever it takes to restore confidence to rocky markets, while South Korean and Dutch governments promised measures to shore up their economies and growth.

That helped to send Japan's Nikkei share average up 1.3 percent, and the commodity-heavy S&P/ASX 200 2.9 percent higher.

London Metal Exchange copper rose $24 to $4,830 a tonne at 0340 GMT, holding on to Friday's gains.

"We are seeing an upward correction in the market after weeks of volatile price movements following more announcements of further measures to fight the global crisis," said a Shanghai-based LME trader.

"But, this is still just a correction, as fundamentals, especially the demand outlook in China, do not support any further price rises," he said.

January copper, the most active on the Shanghai Futures Exchange, rose 1.8 percent at midday to 38,370 yuan ($5,619) a tonne, having risen 3.4 percent to 38,960 yuan in early trade.

"Market worries have eased in Shanghai and many traders are recovering after over-reacting on the downside," said analyst Wang Zheng at Everbright Futures.

"Volumes of short positions in the Shanghai market declined today, as several traders cut their holdings as downside momentum is weakening."

In other metals, London zinc gained 4 percent to $1,275, while its Shanghai counterpart rose by 1.5 percent to 10,605 yuan, recovering from a life-time low of 10,300 yuan for the benchmark contract earlier in the day.