* London copper futures pare 8 pct gain

* Shanghai falls by daily limit after huge Easter rally

April 14  - Shanghai copper futures fell by their 5 percent daily limit on Tuesday as investors cashed in on three days of gains and London copper fizzled after an early surge to a six-month high.

The Chinese market had rallied 10 percent in the previous two session on a surge in domestic bank lending in March, a rise of 8.3 percent in industrial output, record copper imports and talk the country plans a new economic stimulus package.

But the positive mood gave way to selling on Tuesday ahead of the expiry on the April contract, and the return of London traders after a four-day long weekend.

"The bulls in the market got a bit too excited about a short squeeze over the past few days, and the current fall in the Shanghai market is reasonable," said Li Rong, an analyst with Great Wall Futures.

Li also noted an increase in physical supply, after China imported a record high of copper in March.

Third-month copper futures at the Shanghai Futures Exchange fell by their daily limit of 5 percent from Monday's settlement to 38,820 yuan ($5,679) a tonne, after rallying while London was shut for Easter.

The most-active July contract also fell by its downside threshold.

Three-month LME copper futures

"We have been in a mending phase for some time but prices seem to suggest that the recovery is now well under way," said Jonathan Barratt, Managing Director of Commodity Broking Services.

"The weakening dollar is also aiding price moves. Once we see more evidence of the economic indicators picking up -- and I think that is already happening -- then we can start talking about a sustained recovery."

The dollar pared losses against the euro , but improving risk sentiment in recent sessions, buoyed by a five-week rally in Wall Street stocks, could keep up pressure on the greenback. [USD/]

Other metals were mixed. LME nickel rose more than 6 percent in early trade to $11,750, its highest since early February before stalling, while aluminium fell 2 percent in London and 1.6 percent in Shanghai .

Aluminium stocks at three major Japanese ports slipped from a 10-year high in March to 338,600 tonnes, an official at Marubeni Corp said, the first monthly fall in inventories since October.

The official said aluminium stocks may keep sliding towards 250,000 tonnes.