* Zinc stocks highest since Nov 2004
* Copper stocks 20 percent up since Dec 2010
* Coming up: U.S. employment index for Feb, 1500 GMT.
(Recasts, update prices, pvs Singapore)
By Silvia Antonioli
LONDON, March 7 (Reuters) - Copper fell on Monday as escalating violence in Libya eroded investors' appetite for assets perceived as risky, but a weaker U.S. dollar prevented deeper losses.
Three-month copper on the London Metal Exchange was $9,850.50 a tonne by 1120 GMT from $9,895 at the close on Friday.
"The weakness is due to risk aversion resulting from further conflict in the Middle East and north Africa," Daniel Major, an analyst at RBS, said.
"What is moving the market now is not the underlying fundamentals for each metal but the macro political and economic situation," he added.
Troops loyal to Libyan leader Muammar Gaddafi have launched counter-offensives against rebel-held towns, increasing fears that the country is heading for a civil war rather than the swift revolutions seen in Tunisia and Egypt. [ID:nLDE72602O]
As civil war brewed in Libya, U.S. crude rose to a 30-month high above $106, while investors kept a close eye on top exporter Saudi Arabia, home to most of OPEC's spare capacity and where clerics at the weekend warned against protests. [O/R]
Increasing oil prices reinforce concerns of rising inflation, which could slow economic growth and dent demand for raw materials, analysts said.
However, a weaker dollar lent some support to industrial metals.
The euro rose to a four-month high against the U.S. dollar on steady buying by Middle East accounts and boosted by favourable interest rate differentials. [ID:nLDE7260N9]
A weaker U.S. currency makes dollar-priced commodities more affordable for holders of other currencies.
Investors are now watching out for U.S. employment data due at 1500 GMT.
INCREASING INVENTORIES
Copper stocks continued to build, rising 1,850 tonnes to 427,150 tonnes, the highest level since July 2010, data released on Monday showed.
Inventories of copper have climbed by about 20 percent since December, raising some concerns about waning demand.
Zinc inventories also continued to increase, up by 6,300 tonnes to 725,525 tonnes, the highest level since November 2004.
"The zinc stocks inflows in the last few days is an indication of a market that is well oversupplied with potential further downside," Major said. "Zinc has got the weakest fundamentals in the industrial metals complex."
Credit Suisse said in a note that "zinc is our least preferred exposure in the metals space".
Zinc , used in galvanizing was at $2,440 from $2,461 Friday's close while tin was at $31,500 from $31,850.
Battery material lead was at $2,602 from $2,630 and aluminium was at $2,602.75 from $2,600.
Nickel was at $28,774 from $28,800.
Metal Prices at 1123 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct
move COMEX Cu 448.15 0.35 +0.08 444.70 0.78 LME Alum 2555.00 -45.00 -1.73 2470.00 3.44 LME Cu 9825.00 -70.00 -0.71 9600.00 2.34 LME Lead 2645.00 15.00 +0.57 2550.00 3.73 LME Nickel 29000.00 200.00 +0.69 24750.00 17.17 LME Tin 32100.00 250.00 +0.78 26900.00 19.33 LME Zinc 2540.00 79.00 +3.21 2454.00 3.50 SHFE Alu 16875.00 -115.00 -0.68 16840.00 0.21 SHFE Cu* 74200.00 -520.00 -0.70 71850.00 3.27 SHFE Zin 18860.00 -410.00 -2.13 19475.00 -3.16 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Reporting by Silvia Antonioli; editing by Jason Neely) (silvia.antonioli@reuters.com; +44 20 7542 0901; Reuters Messaging: silvia.antonioli.reuters.com@reuters.net))
