MARKETS-METALS (UPDATE 2) * Dollar weakness helps copper to 8-month high * Aluminium stocks down LONDON, June 10 (Reuters) - Copper rallied to an eight-month high on Wednesday, supported by dollar weakness and improving economic sentiment, while aluminium was boosted by a fall in inventories. Copper, used extensively in power and construction, traded at $5,207 a tonne from a close of $5,170 on Tuesday. It hit a day's high of $5,264, its highest since October 15. Aluminium for three-month delivery on the London Metal Exchange rose to $1,684 a tonne at 1006 GMT from $1,664, having hit a session high of $1,701, its highest since Dec. 2. Stocks of aluminium in LME warehouses fell 3,225 tonnes, just below a record near 4.3 million tonnes. "People are allowing themselves to get a bit more bullish," said Standard Bank analyst Leon Westgate. "It could be a slow process rather than a rapid one, but there will be a recovery rather than further weakness." A weaker dollar makes metals priced in the U.S. currency cheaper for holders of other currencies. The dollar eased as investors shifted from the U.S. unit toward perceived riskier and higher-yielding assets on views the global economy and financial system are improving. "The weaker dollar has again been the main feature this morning," Westgate said. GROWING OPTIMISM Growing optimism over the global economy was reflected in a surge in equities -- European shares rose about 2 percent and Tokyo's Nikkei average hit an eight-month high. Risk sentiment was also buoyed after the U.S. Treasury said on Tuesday that 10 of the country's biggest banks could repay $68 billion in taxpayer money received during the height of the credit crisis. Consumer prices in China, the world's top copper consumer, fell in the year to May for the fourth month in a row, but at a slightly more moderate pace, reassuring economists who play down the risk that deflation could take root. Among other industrial metals, zinc rose to $1,641 from $1,605. It earlier hit $1,650 its highest since October 2. Battery material lead rose to $1,765.50 from $1,730. It hit a high of $1,782, its highest since early October. Tin was at $15,600 from $15,775. It also hit an 8-month high of $15,870. Nickel rose to $15,450 from $15,000, and also hit its highest since early October, at $15,690. "It seems that market participants are gradually turning their attention back to inflation concerns and the dollar index. This, combined with persistent economic optimism, will in our view remain the predominant theme in the next few weeks," VTB Capital said in a note.

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