NEW YORK/LONDON, March 16 (Reuters) - Copper prices posted their biggest one-day gain in 2-1/2 weeks on Wednesday as investors sought value from Tuesday's three-month low, but gains were fragile due to the uncertain economic impact from Japan's nuclear crisis.
"It's more risk appetite back in the market, and secondly (investors are) thinking the slump of the recent days might be overdone," Eugen Weinberg, an analyst at Commerzbank, said.
Copper prices on the London Metal Exchange have fallen more than $1,000 a tonne from the record $10,190 hit last month.
LME three-month copper CMCU3 closed up $142 at $9,260 a tonne, recovering from Tuesday's slide to a three-month low at $8,944.50. May copper HGK1 on the New York Mercantile Exchange jumped 6.05 cents to finish at $4.1975 per lb, after dealing between $4.17 and $4.27.
Copper prices derived support from a recovery in Asian markets, driven by a 5.7 percent rise in Japan's Nikkei stock average
But copper's gains were scaled back as losses in other equity markets deepened.
The S&P 500, down 3.1 percent for the week, and the Nasdaq composite indexes turned negative for the year after the chief of the U.N.'s nuclear watchdog said the situation at a damaged nuclear reactor in earthquake-stricken Japan was "very serious."
Longer term, reconstruction efforts in Japan should boost demand for industrial metals, keeping some metals, such as copper and lead, in production deficits.
The global copper market swung into a deficit of 14,000 tonnes in 2010 from a surplus of 410,000 tonnes in the previous year, the World Bureau of Metal Statistics said Wednesday.
"It's pretty volatile," Catherine Virga, senior base metals analyst with CPM Group in New York, said of the broader market.
She added that with the right news headline, that volatility could spike even further.
The main index of volatility .VIX rose 15 percent and is up more than 40 percent this week.
Escalating violence in the Middle East added to the tentative tone, boosting oil prices and inflation concerns.
"The twin shocks of Middle Eastern political uprisings and the largest earthquake ever to hit Japan have increased downside risks to global growth and metals prices in the short term," Barclays Capital said in a note.
There were also other headwinds facing the economic recovery. U.S. housing starts posted their biggest fall in 27 years in February and Moody's cut Portugal's sovereign debt rating by two notches.
LME inventory data showed aluminium stocks fell 4,475 tonnes to 4,620,450 tonnes. Stockpiles remain in sight of the record 4,640,750 tonnes hit in January 2010. In addition to that, roughly 4 million to 5 million tonnes of aluminium sit off LME stock.
As a result, the front-end of the curve widened to a $30 per tonne contango -- a discount for cash material over the three-month contract -- versus about $20 in early February. MAL0-3
Aluminium CMAL3 closed at $2,458 a tonne, down from a last bid price on Tuesday at $2,510.
Metal Prices at 1904 GMT
COMEX copper in cents/lb, LME prices in $/T and SHFE prices in
Metal Last Change Pct Move End 2010 YTD
COMEX Cu 419.05 5.35 +1.29 444.70 -5.77
LME Alum 2457.00 -98.00 -3.84 2470.00 -0.53
LME Cu 9260.00 142.00 +1.56 9600.00 -3.54
LME Lead 2579.00 74.00 +2.95 2550.00 1.14
LME Nickel 24950.00 245.00 +0.99 24750.00 0.81
LME Tin 28550.00 -50.00 -0.17 26900.00 6.13
LME Zinc 2287.00 5.00 +0.22 2454.00 -6.81
SHFE Alu 16655.00 100.00 +0.60 16840.00 -1.10
SHFE Cu* 70580.00 1980.00 +2.89 71850.00 -1.77
SHFE Zin 18370.00 165.00 +0.91 19475.00 -5.67