METALS-Copper hits near 7-week high on China recovery hopes

* LME copper hits $8,074.75, highest since Oct.19

* LME cash-to-three-month contango at widest since Feb

* Coming up: U.S. durable goods orders, Oct; 1500 GMT

(Recasts; adds comments, details; updates prices) SINGAPORE, Dec 5 (Reuters) - London and Shanghai copper prices hit their highest in nearly seven weeks on Wednesday, cheered by news that China is seeking more effective policies to ensure stable economic growth. Concerns about the budget talks in Washington were temporarily shelved as risk appetite returned, spearheaded by Shanghai shares that had rallied nearly 3 percent in their biggest one-day rise since the end of September. China will make policies more targeted and effective in 2013 to help with the economic recovery, state television quoted Chinese Communist Party chief Xi Jinping as saying on Tuesday.

"Risk appetite is back," said a Singapore-based trader, adding that some stop-loss buying helped fuel the rise in copper. "The general sentiment is that the U.S. fiscal problems will probably just be kicked down the road, and we may even see a short-term rally." The $8,100 level is seen as a key resistance on copper's ascent, traders said. Talks to avoid the U.S. "fiscal cliff", $600 worth of tax hikes and spending to take effect early next year, remained at a stalemate, although Republican lawmakers' unity against President Barack Obama's stance on higher tax rates for the wealthiest Americans showed signs of strain. Three-month copper on the London Metal Exchange rose to $8,074.75 a tonne, its highest since Oct. 19, before easing to $8,055 by 0704 GMT. The most-traded March copper contract on the Shanghai Futures Exchange gained more than 1 percent to a near seven-week high of 57,970 yuan ($9,300) earlier in the day, and closed at 57,760 yuan. Technical analysis suggested that LME copper will form a top at around $8,046 while Shanghai copper's gains are limited at 58,480 yuan, said Reuters market analyst Wang Tao.

FUNDAMENTALS LACKLUSTRE Though Beijing's stance lifted the market sentiment, industrial metals still face a grim outlook of lacklustre demand and, in some cases, excessive stocks, in the short term. "I don't expect dramatic improvement in the economy any time soon," said Fang Junfeng, an analyst at Shanghai CIFCO Futures, adding that any substantial policy change in China will not be announced until the annual congressional meeting chooses the new cabinet. "Before then, the manufacturing sector is likely to maintain the status quo, and demand for copper remain sluggish." The latest HSBC survey showed slower growth in China's service sector, hindering hopes that the world's second-largest economy could turn around the corner sooner rather than later, after last weekend's factory survey found China's economy was regaining vigour. LME copper's cash-to-three-month spread <MCU0-3> stood at a contango of $21.16 a tonne, its widest since mid-February, suggesting sluggish demand.

Base metals prices at 0704 GMT

Metal Last Change Pct Move YTD pct chg LME Cu 8055.00 25.00 +0.31 5.99 SHFE CU FUT MAR3 57760 480 +0.84 4.34 HG COPPER MAR3 367.55 2.00 +0.55 6.97 LME Alum 2093.75 -0.25 -0.01 3.65 SHFE AL FUT FEB3 15400 05 +0.03 -2.81 LME Zinc 2031.50 9.00 +0.44 10.11 SHFE ZN FUT MAR3 15435 65 +0.42 4.33 LME Nickel 17480.00 -25.00 -0.14 -6.57 LME Lead 2240.50 9.00 +0.40 10.10 SHFE PB FUT 15370.00 70.00 +0.46 0.56 LME Tin 21701.00 -124.00 -0.57 13.03 LME/Shanghai arb^ 929

Shanghai and COMEX contracts show most active months ($1 = 6.2256 Chinese yuan)

(Editing by Miral Fahmy)