* U.S. Dec payrolls data come in below expectations
(Recasts, updates prices, adds comment)
By Pratima Desai
LONDON, Jan 7 (Reuters) - Copper prices recovered from two-week lows on Friday, supported by expectations of stronger demand this year from top consumer China and other industrial markets.
At 1416 GMT, Benchmark copper on the London Metal Exchange traded at $9,409 a tonne, compared with from $9,470 at Thursday's close.
The metal used in power and construction had earlier fallen to $9,300 an ounce, its lowest since Dec. 24, on talk of tighter monetary policy in China and the United States and a stronger dollar. But it recouped losses as the dollar pared gains following disappointing U.S. payrolls data.
"It shows that the U.S. is still facing severe problems, and it will take a bit of time before it recovers to pre-crisis levels," Commerzbank analyst Daniel Briesemann said, referring to U.S. payrolls.
He added that the outlook for metals in the first half was still positive, despite the new data.
"There is a huge price increase potential for base metals in first quarter and in the first half of 2011. This is due to metals demand recovering not only in China, but in other industrial markets as well. Also there are still supply problems, especially for copper and tin."
U.S. non-farm payrolls showed the U.S. economy had created far fewer jobs that expected in December, suggesting the Federal Reserve will complete its asset buying program, but the unemployment rate still dropped to its lowest in more than 1-1/2 years.
Copper initially extended losses after the data but then pared them back as the dollar cut its gains against the euro. The U.S. currency had risen to a four-month high versus the single currency. A stronger dollar makes dollar-denominated commodities more expensive for holders of other currencies.
Earlier in the week a report showing strong growth in private sector job creation triggered speculation of tighter monetary policy in the United States, the world's largest economy. TEMPORARY EFFECT
Also weighing on copper was the prospect of commodity index rebalancing, which could see large sales of copper after gains of more than 30 percent last year.
The Dow Jones-UBS Commodity Index and Standard & Poor's S&P GSCI index, tracked by funds with about $160 billion in combined assets under management according to figures from Mitsubishi Corp, will rebalance to new weights Jan. 7-13.
"This may only have a temporary effect, but it does add to the negativity," an LME floor trader said.
He added that rising stocks in LME warehouses were on the radar, "but the focus is still on the large drop last year".
Stocks of copper in London Metal Exchange warehouses at 379,525 tonnes are down more than 30 percent since the middle of February. But since Dec. 9, they have increased by more than 8 percent.
"Global (copper) inventories are low," Credit Agricole said in a note. "Lead demand is resilient due to replacement battery market -- accounts for 40 percent of global lead consumption."
Global consumption of lead is estimated at around 9 million tonnes and of copper at around 19 million tonnes.
Battery material lead traded at $2,640 a tonne from $2,656 a tonne at the close on Thursday, when the battery material touched $2,712.75 a tonne, its highest since May 2008 on concern about supplies from Australia.
Aluminium hit $2,524 a tonne earlier on Friday as the market tried to factor in limited supplies from China, the world's largest producer and consumer, due to restricted power supplies.
The metal used widely in transport and construction later traded $2,517.25 from $2,518 at the close on Thursday.
Zinc traded at $2,415.75 a tonne from $2,455, tin was at $26,300 from $26,180 and nickel traded at $24,500 from $24,550 on Thursday.
Metal Prices at 1421 GMT
Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Percent Move End 2010 Ytd Percent
move COMEX Cu 430.15 -2.55 -0.59 444.70 -3.27 LME Alum 2501.00 -17.00 -0.68 2470.00 1.26 LME Cu 9389.00 -151.00 -1.58 9600.00 -2.20 LME Lead 2634.50 -21.50 -0.81 2550.00 3.31 LME Nickel 24300.00 -250.00 -1.02 24750.00 -1.82 LME Tin 26275.00 95.00 +0.36 26900.00 -2.32 LME Zinc 2406.00 -49.00 -2.00 2454.00 -1.96 SHFE Alu 16850.00 -100.00 -0.59 16840.00 0.06 SHFE Cu* 69500.00 -2110.00 -2.95 71850.00 -3.27 SHFE Zin 18910.00 -735.00 -3.74 19475.00 -2.90 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
