METALS-Copper bounces on bargain hunt, debt fears linger

* Copper consumers support prices but volumes weak

* Eyes on Greece, sovereign debt markets. (Recasts, updates prices, market activity to New York close; new byline, dateline, previously LONDON)

By Chris Kelly

NEW YORK, Feb 8 - Copper rose on Monday, bouncing off 3-1/2-month lows amid on bargain hunting and a weaker dollar, but the metal remained vulnerable to worries about the fiscal health of some euro zone countries.

Benchmark copper for March delivery <HGH0> firmed 5.55 cents, or 1.9 percent, to settle at $2.9130 per lb on the New York Mercantile Exchange's COMEX division. The metal used in power and construction rose as high as $2.9315.

Benchmark copper <MCU3> on the London Metal Exchange ended at $6,450 a tonne, up from $6,265 at the close on Friday. London copper touched a session high of $6,475.

The dollar slipped against the euro as investors regained some appetite for risk. A weaker greenback makes dollar-priced copper cheaper for foreign investors. [ID:nN08195366]

"With the weaker dollar today, I think a lot of people may feel like the sell-off last week was over-done," said Matthew Zeman, head of trading with LaSalle Futures Group in Chicago. "We're seeing a nice bounce today, but whether or not it's short-lived is a whole other question."

He said copper could stabilize if investors grow less fearful about debt default in Europe and the global economy shows more signs of clawing out of the financial crisis.

A frenzied sell-off across equities and commodities because of fiscal problems in Greece, Portugal and Spain and a stronger dollar last week pushed copper to $2.8575 per lb, its lowest level since Oct. 15.

However, Germany's Finance Minister Wolfgang Schaeuble said on Monday that the Group of Seven industrialized nations is confident the European Union will sort out Greece's debt problems. [ID:nLDE6170PC]

Expectations of lower copper demand in China, the world's top consumer, and high copper stocks could further hit the red metal after it shot up nearly 140 percent last year on higher appetite for risk and a weaker dollar.

Copper has sunk nearly 13 percent year to date.

STOCKS EASE

Aluminum <MAL3> closed at $2,012 from versus $1,980 on Friday. LME stocks of the metal, used in transport and packaging, fell 7,450 tonnes to 4.58 million tonnes.

A large portion of those stocks are tied up in finance deals, to release cash for producers and to earn banks higher returns than they would get in money markets. [ID:nGEE5BA277]

Traders expect trading to remain subdued until Feb. 22, after the Chinese New Year holiday.

Zinc <MZN3> touched a high of $2,053 a tonne and ended at $2,022.5, up from $1,940 on Friday. Battery material lead ended <MPB3> at $1,965 a tonne, up from $1,940.

Steel-making ingredient nickel <MNI3> closed at $17,200, up from $17,005, and tin <MSN3> slipped to $15,200 from $15,350.

Analysts say nickel may come under pressure after Brazil's Vale <VALE5.SA> said it will push its Sudbury, Ontario operations towards full production, regardless of whether it is able to settle a strike at the complex. [ID:nN05165759]

Metal Prices at 2038 GMT Metal Last Change Percent Move End 2009 Ytd Percent

move COMEX Cu 290.20 4.45 +1.56 334.65 -13.28 LME Alum 2013.00 33.00 +1.67 2230.00 -9.73 LME Cu 6408.75 143.75 +2.29 7375.00 -13.00 LME Lead 1977.00 37.00 +1.91 2432.00 -18.71 LME Nickel 17300.00 295.00 +1.73 18525.00 -6.61 LME Tin 15250.00 -100.00 -0.65 16950.00 -10.03 LME Zinc 2019.50 79.50 +4.10 2560.00 -21.11 SHFE Alu 16160.00 45.00 +0.28 17160.00 -5.83 SHFE Cu* 52650.00 700.00 +1.35 59900.00 -12.10 SHFE Zin 17020.00 40.00 +0.24 21195.00 -19.70 * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Additional reporting by Pratima Desai and Michael Taylor in London and Alonso Soto in Santiago; Editing by David Gregorio)