* New round of EU banks stress tests may impact metals
* Standard Bank says small copper surplus is possible
* Aluminium eyes fresh 2.5 yr high as unrest supports
(Releads, adds analyst comment, updates prices)
By Silvia Antonioli and Melanie Burton
LONDON, March 29 (Reuters) - Copper recovered losses on Tuesday from a one-week low, but small gains were capped as concerns over Italian banks blunted risk appetite, while aluminium approached new 2-1/2 year highs.
Three-month copper on the London Metal Exchange was at $9,540 a tonne at 1502 GMT from $9,535 at the close on Monday.
Earlier it touched a weekly low of $9,429.50 per tonne. Energy intensive aluminium was edging towards highs last seen in September 2008 around $2,650 a tonne underpinned by unrest across oil producing nations which has buoyed oil costs.
A surprise announcement by Italy's UBI Banca's of a 1 billion euro ($1.4 billion) capital hike battered risk appetite, dragging down European stocks on speculation that other lenders could be heading down the same road.
Global macro concerns have resurfaced and along with expected interest rate rises, are weighing on the industrial metals complex, said analyst Stephen Briggs of BNP Paribas.
"The eurozone problems are rearing their head again. There's uncertainty and at the same time a sense that interest rates are on their way up, globally... the end of Q.E. (quantitative easing) looks like it's on its way, China is tightening up, all these things are not great for risk appetite," he said.
The European Banking Authority is soon to publish the definition of core Tier 1 capital to be used in the current round of bank stress tests as well as the pass mark for the banks involved, a regulatory source told Reuters. A new round of bank stress tests in Europe and speculation that Commerzbank is going to need more capital could hit the euro and in turn affect metals.
Economic releases out of the United States pointed to protracted softness in the U.S. housing market, while consumer confidence in March fell from three year highs.
Aluminium was nosing back towards 2-1/2-year highs.
"It is the only metal that is produced in any quantity in the MENA region. Secondly although Japan doesn't mean anything for ally production per say...the whole nuclear story in Japan points towards rising energy costs worldwide, and aluminium is most exposed to that of all of the base metals," he said.
For aluminium, power accounts for about 35 percent of total cash costs, said Briggs.
CHINA BUYS
Elsewhere, consensus is building that Chinese copper consumers may not return to the market until after the second quarter, given rising stocks and slack demand signals.
This is easing concerns over tight supply that have boosted prices this year.
"The scale of the refined inventory (in China) casts into doubt the size of the expected refined deficit in the copper market this year and raises the prospect of a balanced market, or even a small surplus," said Standard Bank bank in a recent note.
Chinese consumers generally buy more copper in the second quarter as construction operations intensify during the northern hemisphere spring and demand for copper rises.
Also recent macroeconomic events, including political turmoil in the Middle East could dampen demand for the metal, Goldman Sachs said.
"We continue to believe that strong copper demand growth will outpace supply growth, generating a cyclically tight copper market," said Goldman Sachs in a note.
"Recent events pose downside risks to demand, potentially deferring our critically low inventory scenario."
Inventories of copper at the London Metal Exchange were down by 400 tonnes to 439,500 tonnes, the latest data showed, however inventories have climbed over 25 percent since mid-December.
Copper was in a $14.50 contango -- discount for cash over three-month material -- compared with $70 backwardation, or a premium for cash material, in mid-December, reflecting sluggish spot demand for the metal.
Tin was at $31,560 from a last bid at $31,500 on Monday, while zinc was at $2,362 from $2,340.
Battery material lead was at $2,660.50 from $2,628, and aluminium was at $2,647 from a last bid at $2,615.
Nickel was at $26,460 from $26,220.
Metal Prices at 1501 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2009 Ytd Percent
move COMEX Cu 433.80 -0.40 -0.09 334.65 29.63 LME Alum 2648.00 7.00 +0.27 2230.00 18.74 LME Cu 9540.00 5.00 +0.05 7375.00 29.36 LME Lead 2650.00 22.00 +0.84 2432.00 8.96 LME Nickel 0.00 -26220.00 -100.00 18525.00 -100.00 LME Tin 0.00 -31750.00 -100.00 16950.00 -100.00 LME Zinc 2365.00 25.00 +1.07 2560.00 -7.62 SHFE Alu 16830.00 80.00 +0.48 17160.00 -1.92 SHFE Cu* 70830.00 -240.00 -0.34 59900.00 18.25 SHFE Zin 18280.00 -35.00 -0.19 21195.00 -13.75 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Editing by Keiron Henderson)