* U.S. and euro zone important for sentiment * "Renewed ardour for red metal looks justified" -Barclays By Pratima Desai LONDON, July 25 (Reuters) - Copper came under selling pressure on Monday as investors fretted about debt default in the United States, but the resulting lower dollar and strong supply and demand fundamentals helped cushion losses. Aluminium used in transport and packaging touched $2,611.75, its highest since June 15 as London Metal Exchange inventory data signalled higher demand. Benchmark copper on the London Metal Exchange was trading at $9,670 a tonne at 0957 GMT from $9,675 at the close on Friday. The metal used in power and construction has traded in a $9,608 to $9,675 range so far on Monday. A bitterly divided Congress has set the United States on a collision course with financial markets as Democrats and Republicans pursue rival plans unlikely to generate the broad support needed to avert a catastrophic debt default. "We have a situation where if they don't get an agreement on raising the U.S. debt level that will be bearish for all assets," said Robin Bhar, analyst at Credit Agricole. "But bizarrely the weakening dollar is supporting commodities." Failure to reach a deal to raise the U.S. debt ceiling has unsettled financial markets and hit the dollar against other major currencies such as the yen and Swiss franc. A falling U.S. currency makes commodities priced in dollars cheaper for holders of other currencies. Traders said the euro zone debt crisis is also weighing on financial and commodity markets. The spotlight is still on Greece's sovereign debt, which ratings agency Moody's cut by three notches on Monday to Ca, just one notch above default. "Both the U.S. and the euro zone are important in terms of sentiment, but really for demand we should be looking at China," a LME copper trader said. EVIDENCE STACKS UP China is the world's largest consumer, accounting for nearly 40 percent of global demand estimated at around 21 million tonnes this year. The absence of Chinese consumers -- unwilling to buy at high prices and using their stocks instead -- from the international market has kept copper prices subdued since a record high of $10,190 a tonne hit on February 15. "A period of renewed ardour for the red metal looks justified ... China's domestic prices have risen relative to international ones and it appears that a sustained period of domestic destocking that helped keep import demand at low levels is coming to an end," Barclays Capital said in a note. "Meanwhile, the evidence is stacking up that 2011 could turn out to be one of the weakest years for copper supply growth since the mid-1990s." Analysts cite a litany of supply problems ranging from falling ore grades, slow project start-ups, strikes and bad weather and technical problems. Illustrating the problem is a strike at the world's biggest copper mine, Chile's Escondida, which entered a fourth day on Monday with no sign of a solution to the latest labor dispute. Three-month zinc was trading at $2,473 a tonne from $2,498 at the close on Friday, lead at $2,690 from $2,691, tin at $28,200 from $28,250 and nickel at $23,888 from $23,950. Aluminium was trading at $2,606 a tonne from $2,591 on Friday. Stocks of aluminium in LME-registered warehouses at around 4.38 million tonnes are down more than 34,000 tonnes since July 18. MALSTX-TOTAL Metal Prices at 0959 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 437.55 -3.05 -0.69 444.70 -1.61 LME Alum 2585.00 -6.00 -0.23 2470.00 4.66 LME Cu 9675.00 0.00 +0.00 9600.00 0.78 LME Lead 2689.00 -1.00 -0.04 2550.00 5.45 LME Nickel 23950.00 0.00 +0.00 24750.00 -3.23 LME Tin 28295.00 45.00 +0.16 26900.00 5.19 LME Zinc 2482.00 -16.00 -0.64 2454.00 1.14 SHFE Alu 17590.00 -50.00 -0.28 16840.00 4.45 SHFE Cu* 71530.00 -660.00 -0.91 71850.00 -0.45 SHFE Zin 18530.00 -260.00 -1.38 19475.00 -4.85 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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