METALS-Copper ends down in mild retreat from 10-mth highs

* Dollar, weak fundamentals drag copper down by close

* Expectations grow for second half, eyes on China data

* Capacity restarts pressure aluminum prices (Changes headline, recasts, updates with New York closing copper prices, adds NEW YORK to dateline and analyst comments)

By Chris Kelly and Michael Taylor

NEW YORK/LONDON, Aug 10 (Reuters) - Copper prices eased back from 10-month highs on Monday, as recent enthusiasm about economic recovery and demand prospects faded in the face of a firmer dollar and worries about weak underlying fundamentals.

Copper for September delivery HGU9 on the New York Mercantile Exchange's COMEX division fell 1.50 cents to close at $2.7705 a lb, pulling back from a session peak at $2.8465, its loftiest level since October 1.

On the London Metal Exchange (LME), three-month copper MCU3 shed $15 to finish at $6,135 a tonne, also retreating from a new 10-month peak at $6,258.

The metal used in power and construction began trending higher -- up about 50 percent since April -- when markets started to believe the worst of the recession could be over.

Improved economic sentiment received a boost last week from upbeat manufacturing figures from the United States and China, and surprisingly strong U.S. employment data that indicated that the recession was nearing an end. [ID:nL3653303] [ID:nN07385157]

"The focus seems to be on recovery," said Michael Gross, futures analyst with Optionsellers.com in Tampa, Florida. "A lot of this is about sentiment right now, and the mood of the market wants to believe that things are getting better."

Calyon analyst Robin Bhar cited the recent price strength purely on investment money flows, nothing else.

"The fundamentals haven't changed. In fact, stocks have risen sharply ... underlying demand, if you listen to people in the real world and producers, is nonexistent," he said.

Attention was now on economic data from China, the world's top industrial metals consumer, due on Tuesday and expected to confirm stronger growth. [ID:nBJC000431] [ID:nSP425305]

"If we get even slightly positive numbers this week from China, this market could easily have another leg higher," Optionsellers.com's Gross said.

"I think we could have a shot at $3.00 (a lb)."

CAPACITY RESTARTS