METALS-Copper falls on equity markets, demand concerns

* Weaker dollar gives some support

* Copper inventories rise but aluminium dips

LONDON, Oct 27 - Copper prices eased on Tuesday, as the combination of fragile equity markets and rising inventories fuelled economic and demand concerns, while a weaker dollar provided some support.

Copper for three-month delivery on the London Metal Exchange traded at $6,582 a tonne in rings from $6,613 at the close on Monday and compared with a session low at $6,538.

"A correction in the equity market is more a reality check to the commodities that things are not necessarily buoyant," said Neil Buxton, managing director at GFMS Metals Consulting.

"Any sort of correction wouldn't really surprise me," he said of metals. "There is a disconnect between prices on the LME and the conditions being faced by consumers of base metals ... From a fundamental point of view, we struggle to justify the increases in recent weeks." The red metal, used in power and construction, touched a 13-month high at $6,732 a tonne on Monday before reversing gains as the dollar rallied and equities fell later in the session.

Providing the initial boost for industrial metals was data showing hefty imports of the metal into China.

But the U.S. currency eased on Tuesday, making commodities priced in dollars less expensive for holders of other currencies.

Also supporting, U.S. home prices in August rose for the fourth straight month, surpassing forecasts and providing signs that the housing market is stabilizing.

But LME copper stocks continue to rise, indicating demand has yet to recover outside China. The latest data showed stocks rose 1,800 tonnes to total 370,650 -- their highest level since mid-May.

Also, emerging market and Japanese shares fell sharply on Tuesday after a sell-off on Wall Street.

STIMULI TO END?

Investors are currently mulling over speculation that governments and central banks of some major economies may eventually withdraw stimulus measures.

On Tuesday, India's central bank began the first phase of its exit from expansionary policy by ending some liquidity support measures taken when the global crisis hit Asia's third-largest economy harder than expected.

"Today's India news supports the view that some countries are clearly past the worst and moving to contain any potential inflation breakout," said David Thurtell, an analyst at Citigroup. "A tightening of monetary policy in the major economies will eventually hurt metals demand."

In other metals, aluminium gained $19 to $2,017 in LME rings. LME stocks of the metal, used in transport and packaging, fell 4,475 tonnes to 4.57 million tonnes, maintaining a slow retreat away from record levels which began in mid September.

On Monday, aluminium touched a two-month high at $2,028.

Aluminum Corp of China Ltd (Chalco), the world's most valuable aluminium maker, returned to profit in the third quarter on recovering demand and prices for the metal.

Steel-making ingredient nickel traded at $18,950 in LME rings from $18,650 while battery material lead was untraded in official rings but last bid at $2,323 from $2,310. Zinc traded at $2,342 a tonne from $2,315 and tin was untraded in rings but last bid at $15,150 in LME rings from $15,255. Zinc touched a 17-month high at $2,365.75 on Monday as analysts cited improving physical demand.

Metal Prices at 1323 GMT Metal Last Change Percent Move End 2008 Ytd Percent

move COMEX Cu 301.15 1.20 +0.40 139.50 115.88 LME Alum 2014.00 16.00 +0.80 1535.00 31.21 LME Cu 6613.00 0.00 +0.00 3060.00 116.11 LME Lead 2318.00 -42.00 -1.78 999.00 132.03 LME Nickel 18875.00 225.00 +1.21 11700.00 61.32 LME Tin 15125.00 -130.00 -0.85 10700.00 41.36 LME Zinc 2328.00 13.00 +0.56 1208.00 92.72 SHFE Alu 15220.00 -50.00 -0.33 11540.00 31.89 SHFE Cu* 51160.00 -700.00 -1.35 23840.00 114.60 SHFE Zin 17145.00 -115.00 -0.67 10120.00 69.42 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07