METALS-Copper drifts on strong dollar, patchy China recovery

* China factory output, consumer spending weaker than expected

* China Feb inflation at 10-month highs; Fitch downgrades Italy

* Some post-holiday trade buying emerges in China, cushions prices

LONDON, March 11 (Reuters) - Copper drifted lower on Monday as the dollar held near a seven-month high against major currencies and risk appetite was eroded by disappointing data from China and worries about Italy, although losses were limited by some demand for metals from China's consumers. Official data released at the weekend in China - which consumes 40 percent of the world's copper - showed inflation at a 10-month high in February while factory output and consumer spending were weaker than forecast. Also putting pressure on metals prices, the dollar index against a basket of major currencies held flat not far off seven-month highs hit on Friday after much stronger than expected U.S. jobs data. A strong dollar makes dollar-priced metals costly for European investors. In Europe, Fitch downgraded Italy's credit rating by one notch to BBB-plus, with a negative outlook, citing political uncertainty following last month's inconclusive election. Three-month copper on the London Metal Exchange was down 0.63 percent at $7,692 a tonne by 0950 GMT. Copper last week showed its first higher weekly close in four, though the metal remains down more than 2 percent for the year with post-holiday demand from China having disappointed. "I think buying in China is improving, but the start to seasonal restocking has been more subdued than expected," said Angus Staines, commodity and mining analyst at UBS. "We expect seasonal restocking to support the (copper) price above $8,000 a tonne in the very short term. After that, as seasonal demand begins to fade, the price will reflect an oversupplied market." The copper market is expected to record a surplus this year for the first time since 2009, while LME copper stocks have been rising consistently this year, and are currently at 513,550 tonnes - their highest since April 2010. Stocks in Shanghai bonded warehouses are estimated at around 900,000 tonnes, while Chinese imports have been falling consistently as traders dip into local supplies rather than restocking.

CHINA CONSUMERS START BUYING Still, Chinese traders said some buying was supporting LME prices, helped by higher prices of Shanghai copper compared with the landed cost of LME metal, which attracts a 17 percent value-added tax for imports. "A bit late but they (consumers) finally came in after Lunar New Year," said a trader based in Shanghai.

Analyst Bonnie Liu of Macquarie in Shanghai concurred: "Post Lunar New year, we are definitely seeing demand pick up." "China's macro picture is getting better but there's still a lot of uncertainty, especially on the details of the public policy to be released this week," she added. Communist Party chief Xi Jinping formally takes over as China's new president during the annual meeting of the National People's Congress which ends March 14. In other metals traded, soldering metal tin fell 1.03 percent to $23,550 a tonne, while zinc, used in galvanizing, dropped 1.53 percent to $1,945 a tonne. Battery material lead fell 1.08 percent to $2,189.50, aluminium dropped 1.13 percent to $1,942.75, while stainless-steel ingredient nickel fell 0.96 percent to $16,579 a tonne. Metal Prices at 0952 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2009 Ytd Pct

move

COMEX Cu 347.90 -2.00 -0.57 334.65 3.96 LME Alum 1965.00 0.00 +0.00 2230.00 -11.88 LME Cu 7740.00 -25.00 -0.32 7375.00 4.95 LME Lead 2212.00 -0.50 -0.02 2432.00 -9.05 LME Nickel 16735.00 -5.00 -0.03 18525.00 -9.66 LME Tin 23795.00 0.00 +0.00 16950.00 40.38 LME Zinc 1975.00 0.00 +0.00 2560.00 -22.85 SHFE Alu 14800.00 -75.00 -0.50 17160.00 -13.75 SHFE Cu* 56480.00 -270.00 -0.48 59900.00 -5.71 SHFE Zin 15145.00 -95.00 -0.62 21195.00 -28.54 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN

SHFE ZN began trading on 26/3/07