* Zinc inventories within 2,000 tonnes of 2004 peaks
* Copper in a $21.50 contango
* Lead premium for tomorrow/next day delivery flares up
* Mar US housing starts rise 7.2 pct vs Feb 18.5 pct drop
(Adds US housing data, reledes, updates prices, comment, changes byline, dateline)
By Carole Vaporean and Silvia Antonioli
NEW YORK/LONDON, April 19 (Reuters) - Copper rose close to 1 percent on Tuesday, clawing back some ground after six straight sessions of losses, helped initially by the weaker dollar, then pushed to session highs after stronger-than-forecast U.S. housing starts.
Investors remained nervous about debt problems in the United States and Europe, limiting the red metal's gains.
Three-month copper on the London Metal Exchange traded last traded at $9,340 a tonne at 1649 GMT (1249 EDT) from $9,225 at the close on Monday. U.S. copper futures were up 3.60 cents, or 0.86 percent, at $4.23.30 per lb.
"For the most part I think copper's getting a bounce off of positive housing numbers today. Earnings have been pretty good. Unfortunately, we have these debt problems and we'll see how those shake out. But for now, the market is choosing to look past it," said Matthew Zeman, head of trading with Kingsview Financial in Chicago.
U.S. housing starts and permits for future home construction rose more than expected in March, snapping back from the prior month's winter depressed levels, government data showed.
The Commerce Department said housing starts rose 7.2 percent to a seasonally adjusted annual rate of 549,000 units.
In the previous session, copper fell almost 2 percent to its lowest in a month.
"The market panicked a bit yesterday, and they're feeling a little less panicked today," said BNP Paribas analyst Stephen Briggs.
"The reserve requirement rise in China and the S&P move was something (metals) had to react to, but the default position is that things are not as bad as all that."
Standard & Poor's threatened on Monday to downgrade the U.S. prized AAA credit rating, raising concerns over the debt situation of the world's largest economy and second largest consumer of copper.
Earlier this week, China's central bank announced an increase in bank reserve requirement ratios (RRR).
"Yesterday the bombshell of the U.S. downgrade caused mayhem in the market. Today copper bounced back, supported by technicals but it is still vulnerable," an LME ring trader said.
A report that Greece may have to restructure its debt also weighed on market confidence.
But world markets bounced back from the previous session's trouncing after better-than-expected earnings results from investment banking bellwether Goldman Sachs.
In the metals markets, expectations of a supply deficit this year and an optimistic long-term demand outlook provided support.
"The physical market looks quite good despite high inventory levels," said Daniel Briesemann, an analyst at Commerzbank.
"We expect China to be a stable market player over the next few months. We certainly do not expect demand from China to collapse."
COPPER CONTANGO
Increasing copper inventories, however, have raised concerns about some short-term demand weakness from China.
Inventories of copper on the London Metal Exchange rose 175 tonnes to 451,950 tonnes, its highest since June, the latest data showed. Inventory levels have been on the rise since December.
"In a market that is supposedly in deficit, it remains unclear why copper inventories held on exchange have been increasing," said Bernstein Research in a note.
Either demand for copper is lower than expected, off-exchange inventory is being moved on-exchange, or supply is greater than expected, it said.
"Two of these three possible reasons would imply that there is a significant downside to copper prices from current levels."
Copper was in a $21.50 contango, which is a discount for cash over three-month material, versus December's $70 backwardation, which is a premium for cash over three-month copper, the latest data showed, reflecting a dearth of nearby demand.
Tin traded at $32,600 from $32,350, while zinc changed hands at $2,330 from $2,325, Monday's close.
Inventories of zinc on the London Metal Exchange rose 21,300 tonnes to 785,600, the most recent data showed, and are now within 2,000 tonnes of 2004 peaks.metal for tomorrow versus next day delivery traded as high as $10, indicating a lack of immediately available supply.
Aluminium recovered to $2,682 from $2,674.
Nickel was bid at $25,500 from $25,500.
(Editing by Alison Birrane and Jane Baird;editing by Sofina Mirza-Reid)