* Confidence dwindles after Fed cuts U.S. growth forecasts
* Aluminum stocks surge to record above 4.17 mln tonnes
(Recasts, updates with New York closing copper prices, adds NEW YORK to dateline and analyst comments)
NEW YORK/LONDON, May 21 (Reuters) - Copper lost as much as 4 percent on Thursday before narrowing losses near the close, dragged down by a souring of broader market sentiment amid fresh signs of economic weakness that signaled the road to recovery will likely be long, arduous and fraught with uncertainty.
"The weakness today is from the stock market tailing off and general concerns about whether or not we have another leg down or a big correction in equities," said Tom Hartman, broker with Altavest Worldwide Trading in Mission Viejo, California.
Copper for July deliveryon the New York Mercantile Exchange's COMEX division slipped 5.55 cents to settle at $2.0510 a lb, after dealing in a session range between $2.0135 and $2.10.
On the London Metal Exchange (LME), copper for three-months deliverywas last quoted at $4,469/4,470 from $4,640, and hit a day's low of $4,425.
"Every time you get a piece of information that shows that things are worse than expected, I think you're going to see another leg down in the market," said Zachary Oxman, managing director with TrendMax Futures in reference to U.S. data that showed a further deterioration in the labor market. [ID:nN21222195]
Copper prices are up about 50 percent since late February when markets started to believe the worst could be over for the global economy.
Economic reports this week suggested otherwise.
"Negative economic news is outweighing the bear market rally we've seen in recent months," said John Meyer, an analyst at investment bank Fairfax.
"The Japanese (growth) data yesterday was surprising in its negativity, terrible really ... The market is still digesting this data."
Japan's economy shrank at a record 4 percent in the first quarter as domestic demand and investment buckled, threatening to crush an anticipated export-led bounce in the second half of this year. [ID:nT367411]
Traders said news that ratings agency Standard & Poor's had lowered its outlook on Britain to negative was adding to the overall gloomy mood. [ID:nLL627240]
Also eroding support was expectations that purchases by China, the world's largest consumer of copper, were coming to an end and that stocks of the metal in LME warehouses, falling for some months now, could start rising.
Copper stocks, which are above 336,000 tonnes, have fallen about 40 percent since late February and are at their lowest since late December 2008.
Material earmarked for delivery, or canceled warrants, now only accounts for about 15 percent of total stocks from 20 percent a few weeks ago.
RECORD ALUMINUM STOCKS
Aluminum for three-months delivery on the LMEslid to a three-week low of $1,442 a tonne after warehouse inventories surged to a record above 4.17 million tonnes.
"People are running away from aluminum," Andrey Kryuchenkov, an analyst at VTB Capital said of the speedy rise in stocks. "If you look at the pace, it's incredible."
The metal used in transport and packaging closed at $1,452 a tonne from $1,493 at the close on Wednesday.
Analysts said the focus in the market was now turned to nickel stocks, where about 4 percent of total stocks have been tagged for delivery.
"Nickel is seeing decent buying and canceled warrants are rising as stainless steel mills start to restock," said David Thurtell, an analyst with Citigroup.
Three-month nickelclosed at $12,180 a tonne from $12,650 at the close on Wednesday, zinc was at $1,455 from $1,518, lead at $1,400 from $1,463 and tin was at $13,350 from $13,750.
Lead hit a day's low of $1,378, its lowest since May 1. Metal Prices at 1915 GMT Metal Last Change Pct Move End 2008 Ytd Pct
move COMEX Cu 205.40 -5.45 -2.58 139.50 47.24 LME Alum 1446.00 -47.00 -3.15 1535.00 -5.80 LME Cu 4492.00 -148.00 -3.19 3060.00 46.80 LME Lead 1395.00 -68.00 -4.65 999.00 39.64 LME Nickel 12170.00 -480.00 -3.79 11700.00 4.02 LME Tin 13455.00 -295.00 -2.15 10700.00 25.75 LME Zinc 1451.00 -67.00 -4.41 1208.00 20.12 SHFE Alu 12765.00 35.00 +0.27 11540.00 10.62 SHFE Cu* 36050.00 -520.00 -1.42 23840.00 51.22 SHFE Zin 12710.00 -105.00 -0.82 10120.00 25.59 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Rebekah Curtis in London)
(Reporting by Pratima Desai; editing by Keiron Henderson and Lisa Shumaker)
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