METALS-Copper firms, liquidity returns after Chinese holiday
* CME Group Inc to launch aluminium futures contract
* China Sept HSBC Services PMI 52.4 vs prev month 52.8
(Adds comment, detail)
LONDON, Oct 8 (Reuters) - Copper rose on Tuesday with increased liquidity in the market as Chinese participants returned from a week-long holiday, although the threat of a global surplus was seen capping gains.
Benchmark three-month copper has been trapped in a $7,000-$7,500 range since early August. Prices were up 0.5 percent at $7,282.25 by 1006 GMT.
"The whole market is really dominated by oversupply factors," said Thomas Pugh, commodities economist at Capital Economics.
"You're seeing marginal increases from China, but nothing like the kind of increases in volumes we were seeing a couple of years ago, and it's not enough to absorb some of this excess supply."
Demand from copper product makers in China is heating up on pre-Christmas orders, with headline copper stocks falling by 1.2 percent to 517,000 tonnes.
However, the market remains amply supplied, and the lack of clarity on China's inventories is problematic for investors in a market where it is often difficult to match sentiment with reality.
Growth in China's services industry slowed in September and optimism over the business outlook weakened, a private survey showed on Tuesday, hinting that the world's second-biggest economy is unlikely to rejoin its former fast lane just yet.
A few faint glimmers of hope surfaced on Monday in the U.S. fiscal standoff, with President Barack Obama saying he would accept a short-term increase in the nation's borrowing authority to avoid a default.
Frustration over aluminium storage also surfaced again as LME Week got under way, with CME Group Inc saying it planned to launch an aluminium futures contract that could compete with the London Metal Exchange's $54 billion market, in the latest sign that the years-long crisis over warehousing has emboldened rivals.
"Customers want a viable alternative to other exchange contracts on offer today," said Harriet Hunnable, CME managing director of metals.
Nickel was flat at $13,948 a tonne, while tin gained 0.7 percent to $23,850 a tonne, having soared on Friday by 5.5 percent to a seven-month high of $24,000, boosted by worries over supplies from top exporter Indonesia.
Benchmark aluminium rose 0.8 percent to $1,869.25 a tonne, zinc gained 0.7 percent at $1,890, and lead gained 1.4 percent at $2,091 per tonne.
(Additional reporting by Melanie Burton in Singapore; Editing by Veronica Brown and Jason Neely)