METALS-Copper down on inventories, Japan

* Renewed fears about Japan's commodity demand

* Copper stocks at highest since last July

* Pending sales of previously owned U.S. homes rise

(Updates prices; add comments, detail)

By Pratima Desai and Silvia Antonioli

LONDON, March 28 (Reuters) - Copper prices stumbled on Monday as renewed worries about Japan's crisis, weak demand from top consumer China and rising stocks persuaded investors to retreat from assets perceived to be risky.

The benchmark copper contract on the London Metal Exchange was at $9,597 a tonne by 1533 GMT from an earlier low of $9,510.25 a tonne and down from $9,685 at Friday's close.

The metal used in power and construction is down about 6 percent since hitting a record high of $10,190 on Feb. 15.

"Out of China you just don't hear anything positive. There is apparently a lot of stock hidden and not hidden in China," said MF Global analyst Edward Meir, adding that speculation of further monetary tightening there weighed on sentiment.

"There are questions about how strong demand from China will be," he added.

China's apparent demand for refined copper slumped 12.5 percent in February, data showed last week.

Selling was also triggered by news that the operator of Japan's crippled nuclear plant had given out mistaken radiation readings. "The radiation ... is evidently much higher than first thought, which is raising fears that the regions around the nuclear power plant will be contaminated for years and could therefore be uninhabitable," Commerzbank said in a note.

"It could also mean that reconstruction is not possible at all in some regions because of the radiation, which would ultimately result in a lower demand for commodities."

Unrest in North Africa and the Middle East was also denting risk appetite.

Copper was broadly unchanged after data released at 1400 GMT showed that pending sales of previously owned U.S. homes unexpectedly rose in February.

"It is another small brick in the wall of recovery but maybe the market was hoping for a better figure," Alex Heath of RBC Capital Markets said.

GATHERING PACE

The euro erased losses against the dollar on Monday as expectations that the European Central Bank will tighten monetary policy as early as next month softened concerns about Germany's ruling party losing a key state election.

A weaker U.S. currency makes commodities priced in dollars more affordable for holders of other currencies.

"There's a more negative feel across commodities, partly to do with the nuclear situation in Japan and partly to do with a German election, which is weighing on the euro," a trader said.

Stocks of copper in London Metal Exchange warehouses, which at 439,900 tonnes were up more than 25 percent since December 9 at their highest since last July.

"The rise in inventories indicates there is still quite a bit of unreported material still available, suggesting perhaps the market is not as tight as the price would suggest," Major said.

On the physical market premiums had stagnated near two-year lows until last week.

European premiums for physical material rose last week ahead of expectations of higher demand in the traditionally strong second quarter, when China is expected to return to the copper market.

"With the potential for re-stocking in China if credit is loosened -- following the involuntary credit related de-stocking so far in 2011 -- there could be a perfect storm for copper by mid-year/third quarter," Macquarie said in a note.

Zinc was at $2,342.75 a tonne from $2,378, lead was at $2,636 from $2,670, tin was at $31,699 from Friday's last bid at $31,750, and nickel was at $26,601 from $27,050.

Three-month aluminium was at $2,628 a tonne from $2,641 a tonne on Friday. The metal used in transport, packaging and construction has been helped recently by expectations of higher energy costs in the smelting process.

"The reaction against nuclear appears to be gathering pace, that means higher electricity costs," the trader said.

Power accounts for about 35 percent of aluminium smelting costs on average.

(Source: http://www.futurespros.com/news/metals-news/metals-japan-crisis,-inventories-sap-copper-market-sentiment-1000009413)