METALS-Copper steady on US budget concerns, China optimism

(Updates prices, changes details)

* Dollar rises to 3-week high on budget concerns

* China service sector accelerates in December

* U.S. jobless claims rise in holiday-distorted week

LONDON, Jan 3 (Reuters) - Copper was little changed on Thursday as the dollar firmed on worries about new budget battles over spending cuts in the United States, but promising data from top metals consumer China helped prevent losses. Benchmark copper on the London Metal Exchange was $8,219 per tonne to its highest since mid October on news that U.S lawmakers had reached a budget deal on tax hikes. After a deal narrowly averted the so-called "fiscal cliff", President Barack Obama and congressional Republicans now face even bigger budget battles in the next two months on spending cuts and an increase in the nation's limit on borrowing. "With the uncertainty out of the way after the fiscal cliff resolution, as far as markets are concerned the focus is now on the huge budget gap that there is to cope with," Andrey Kryuchenkov, an analyst at VTB, said. The concerns over the budget wrangling that lies ahead lifted the dollar to a three-week high against a basket of currencies. The dollar is often favoured at times of market uncertainty, and strategists said it could see further gains in coming weeks. "With the U.S. dollar looking stronger today, we expect to see some softness in the commodities markets early but do expect yesterday's rally to continue throughout the month," RBC said in a research note. A stronger dollar makes metals, priced in the U.S. unit, more expensive for holders of alternative currencies. Kryuchenkov said attention was also focussed on the economic outlook for China, which has shown promising signs in the last few months. The latest data showed growth in China's services sector accelerated in December at its fastest pace in four months, adding to signs of a modest year-end revival in the world's second-largest economy. "Non-manufacturing PMI showed a bigger-than-expected rise, providing yet more evidence that the turnaround of the Chinese economy is gaining pace, with stronger economic growth likely in the months ahead," ETX Capital's Markus Huber said. Copper was little changed after data showed the number of Americans filing new claims for unemployment benefits rose last week, as the data was too distorted by the holidays to offer a clear read of labor market conditions.

Copper rose by more than 4 percent in 2012, following a 21 percent fall in 2011. Tin was the outstanding winner of the base metals complex last year, rising almost 22 percent, while lead rose by 15 percent, zinc by 13 percent and aluminium by 3 percent. Bucking the trend, stainless steel material nickel lost 9 percent in 2012.

BULLISH LEAD Battery material lead was $2,440 per tonne from a last bid of $2,430 on Wednesday. It hit a session high of $2,499, its highest level since early September 2011, supported by tightening supplies. Some analysts expected more gains for the metal in the medium term. "Lead remains our preferred metal on a medium-term basis, and we expect prices to increase substantially over 2013-15," Credit Suisse said in a note. "In the short term, we expect lead prices to push higher alongside other base metals on improving macroeconomic conditions." Lead stocks at LME warehouses dropped to 314,550 tonnes, the lowest since late October. The ratio of cancelled warrants - material earmarked for delivery - to total stocks rose to a record of close to 57 percent. <0#MPBSTX-LOC>. Benchmark zinc was $2,142 a tonne in rings from a close of $2,141 on Wednesday. On Thursday, it hit its highest since early February at $2,187.25. Aluminium was $2,155 in rings from $2,160, tin was $24,200 from a last bid of $24,445 and nickel was $17,738 from $17,725.

Metal Prices at 1534 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T

Metal Last Change Pct Move End 2012 Ytd Pct

move

COMEX Cu 373.80 0.75 +0.20 365.25 2.34 LME Alum 2153.50 -6.50 -0.30 2073.00 3.88 LME Cu 8215.75 5.75 +0.07 7931.00 3.59 LME Lead 2438.25 103.25 +4.42 2330.00 4.65 LME Nickel 17748.00 23.00 +0.13 17060.00 4.03 LME Tin 24202.00 802.00 +3.43 23400.00 3.43 LME Zinc 2139.00 -2.00 -0.09 2080.00 2.84 SHFE Alu 15365.00 20.00 +0.13 15435.00 -0.45 SHFE Cu* 57770.00 190.00 +0.33 57690.00 0.14 SHFE Zin 15520.00 -25.00 -0.16 15625.00 -0.67 ** Benchmark month for COMEX copper

(Editing by William Hardy and Jane Baird)