METALS-LME Copper soars from 8-month low, demand worries linger

* Deflationary worries weigh on metal prices

* LME copper stocks rise to 10-year high

(Updates with closing prices) LONDON, April 4 (Reuters) - Copper bounced from an 8-month low on Thursday as the euro recovered against the dollar but doubts remained over the prospects for industrial metals as physical demand remains weak and inventories are at multi-year highs. Benchmark copper on the London Metal Exchange (LME) fell to a session low of $7,331.25 a tonne, its weakest since August 3, before recovering to close at $7,440, 0.7 percent up from Wednesday's close of $7,386.50. Prices of copper and other metals recovered as the euro gained ground against the dollar after European Central Bank President Mario Draghi said the bank stood "ready to act" if growth continued to languish, affirming his commitment to keeping the euro zone intact. A weaker U.S. unit makes metals priced in dollars cheaper for holders of other currencies. LME copper has lost about 11 percent since touching a four-month peak in early February of $8,346 and is down almost 10 percent so far this year. Weighing on metals demand prospects, data showed that the number of Americans filing new claims for unemployment benefits rose to its highest level in four months last week, suggesting the labour market recovery lost some steam in March. Recent soft U.S. economic data on manufacturing and jobs has given more firepower to speculators targeting lower prices. At the same time, demand in China, which accounts for 40 percent of world copper consumption, has been disappointing. "The latest U.S. data increased deflationary worries and this has pulled metal prices below what fundamentals would suggest," T-Commodity consultant Gianclaudio Torlizzi said, adding he thought current prices were very attractive as a medium-to-long term investment. Stronger Chinese economic data, including recent numbers tracking factory activity, have failed to translate into physical metals demand so far. LME copper inventories <MCUSTX-TOTAL> rose another 6,850 tonnes on Thursday to 579,175 tonnes, the highest in a decade.

While Wednesday's weak U.S. jobs data raised concerns about another set of payroll numbers on Friday, some analysts were more sanguine. "Going forward, probably the pace of improvement is going to slow because of the U.S. budget cuts, but things do not look as bleak as current price action would suggest," said analyst Stefan Graber of Credit Suisse in Singapore. Friday's payrolls report is expected to show that U.S. employers likely hired at a moderate pace in March, suggesting the economy is gathering momentum despite the onset of across-the-board federal spending cuts. While benchmark copper prices have lost ground, copper premiums in Singapore have climbed to their highest since May, fuelled by a port strike in top producer Chile, and a force majeure event called by India's largest copper smelter.

ALUMINIUM FINDS FLOOR? Three-month aluminium inched up to $1,885 a tonne from a last bid $1,871.50 on Wednesday, after having touched $1,862, its weakest since Aug. 22 . The fall in aluminium prices may have run out of steam since they have hit levels that are creating more pain for producers, said analyst David Wilson at Citigroup in London. "Maybe aluminium has found a floor. Even if you add in the high physical premiums, current prices suggest a big chunk of production is not going to break even," he added. Zinc, untraded at the close, was last bid at $1,889 from a close of $1,857 on Wednesday. Earlier in the session the metal, used to galvanize steel, fell to a low of $1,849 a tonne, the weakest since Nov. 5. Nickel rose to close at $16,100 a tonne from $16,105 after touching a low of $15,980, the lowest since Nov. 16. Lead ended $2,075 a tonne from $2,050 while tin , untraded at the close, was last bid at $22,750 a tonne, from Wednesday's close of $22,700.

Metal Prices at 1627 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2012 Ytd

Pct

move

COMEX Cu 335.15 1.85 +0.56 365.25

-8.24

LME Alum 1883.75 -0.25 -0.01 2073.00

-9.13

LME Cu 7432.00 45.50 +0.62 7931.00

-6.29

LME Lead 2072.00 22.00 +1.07 2330.00

-11.07

LME Nickel 16111.00 6.00 +0.04 17060.00

-5.56

LME Tin 22712.00 12.00 +0.05 23400.00

-2.94

LME Zinc 1888.75 31.75 +1.71 2080.00

-9.19

SHFE Alu 14565.00 -5.00 -0.03 15435.00

-5.64

SHFE Cu* 54070.00 -270.00 -0.50 57690.00

-6.27

SHFE Zin 14520.00 -145.00 -0.99 15625.00

-7.07

* Benchmark month for COMEX copper

* 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

(Editing by Jason Neely and Alison Birrane)