MARKETS-METALS (UPDATE 4) * Concerns for euro zone banking sector knock down euro * Copper stocks fall again, down 76,000 tonnes since Feb * COMING UP: U.S. new home sales, 1400 GMT (Updates prices) By Rebekah Curtis LONDON, May 26 (Reuters) - Copper bounced on Wednesday after tumbling the day before on concerns over euro zone debt problems, but gains looked fragile as the deepening crisis in Europe looked set to weaken the region's demand recovery. Copper for three-month delivery on the London Metal Exchange rose some 2 percent to $6,860 a tonne in official rings from a close of $6,730 on Tuesday. The metal used in power and construction has lost more than 7 percent so far in May after hitting a 20-month high above $8,000 in April. Copper fell 3 percent on Tuesday in a broad commodities sell-off, on concerns demand would suffer from debt problems in euro zone countries such as Greece, Italy, Portugal and Spain. "In Europe, we're seeing a stagnating economic recovery," Andrey Kryuchenkov, an analyst at VTB Capital, said. "I doubt copper will be able to break above $8,000 again this year." And the worries persist. The euro fell broadly on Wednesday -- knocking the European demand outlook and making dollar-priced metals costlier for holders of the European single currency -- as investors fretted Europe's debt woes could wreak havoc on the region's banks. Boosting copper on Wednesday, data showed Japan's output of rolled copper products rose some 70 percent in April from a year ago, showing Asian demand remained powerful. CHINESE DEMAND Investors have worried this year that Chinese demand is softening as the world's top industrial metals consumer, whose consumption helped copper prices surge 140 percent last year, reins in monetary policy to cool its stellar growth. But many analysts were upbeat about longer-term prospects for Asian demand, also adding a U.S. recovery was strengthening. "Sentiment in the long-run is still positive," said Kryuchenkov. "We're still positive about China and the U.S." U.S. new home sales data is due at 1400 GMT. Also supporting prices was a consistent decline in copper stocks at LME warehouses, which indicated a pick-up in demand. Inventories last dipped 275 tonnes to 479,050 tonnes, having fallen 76,000 tonnes since they began declining in mid-February. Stocks of aluminium last fell 3,600 tonnes but were within a whisker of this year's record highs above 4.6 million tonnes. LME copper's technical signal was neutral, a Reuters analyst said, with moves above $6,966 or down to $6,660 possible, though slightly weighted towards the risk of very limited downside retracement. Aluminium traded at $2,041 a tonne in rings from $2,017 on Tuesday. Zinc was at $1,922 from $1,855 and battery material lead was at $1,792 from $1,740. Tin traded at $17,700 from $17,595 and nickel, which was not traded in rings, was quoted at $21,600/21,625 from $21,200. "While physical demand and premiums remain strong, overall sentiment and technical selling continue to cap the markets despite signs that China's appetite for raw commodities continues to grow," RBC Capital said in a note. Metal Prices at 1217 GMT Metal Last Change Percent Move End 2009 Ytd Percent move COMEX Cu 307.80 4.45 +1.47 332.75 -7.50 LME Alum 2031.00 14.00 +0.69 2230.00 -8.92 LME Cu 6862.00 -48.00 -0.69 7375.00 -6.96 LME Lead 1785.00 -45.00 -2.46 2432.00 -26.60 LME Nickel 21350.00 150.00 +0.71 18525.00 15.25 LME Tin 17650.00 55.00 +0.31 16950.00 4.13 LME Zinc 1904.00 49.00 +2.64 2560.00 -25.63 SHFE Alu 15245.00 70.00 +0.46 17160.00 -11.16 SHFE Cu* 54890.00 750.00 +1.39 59900.00 -8.36 SHFE Zin 15790.00 275.00 +1.77 21195.00 -25.50 ** 1st contract month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07 (Editing by Amanda Cooper)

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