(Rewrites, adds New York dateline, updates with New York closing price, graphic and analyst comments)
* Copper climbs on upbeat China, U.S. economic data
* Copper prices within 2 pct of 2012 highs
* LME copper stocks at 2-1/2-year low
* Cancelled warrants at 32 pct
* Coming up: Weekly Shanghai metals inventory data Friday
By Chris Kelly and Susan Thomas
NEW YORK/LONDON, March 1 (Reuters) - Copper rose more than 1 percent on Thursday, recouping some of the previous day's losses, as data indicated top metals consumer China will avoid a sharp economic slowdown to boost risk appetite and overshadow concerns over Europe's debt crisis.
Copper pushed higher in thinner-than-normal volume as it tracked gains in U.S. equities and other commodity markets, like crude oil and gold, in reaction to upbeat economic data from China and the United States that bolstered demand prospects for industrial metals. Copper's advance left it within 2 percent of its yearly peaks of nearly $8,800 per tonne in London and $4 per lb in New York.
"For the better part of the last three months, this has all been a liquidity run ... a risk-on trade in basically all global risk assets, including equities and commodities," said Sean McGillivray, vice president and head of asset allocation for Great Pacific Wealth Management in Oregon.
"Now commodities are hanging in there at some pretty high levels and the only way you get buyers in at those levels is that there is a fundamental back story."
London Metal Exchange (LME) three-month copper rose $131 or 1.54 percent to end at $8,630 per tonne.
In New York, the active May COMEX contract firmed 5.20 cents to settle at $3.9315 per lb, closer to the upper end of its $3.8485 to $3.9370 session range.
Volumes were thin on the first trading day of the new month. A little more than 51,400 lots traded in late New York business, nearly a third below the 30-day average, according to preliminary Thomson Reuters data.
Copper's advance was rooted in overnight data from China showing the country's official purchasing managers' index rose to 51.0 in February from 50.5 in January, as export orders bounced back.
"There's a greater probability now of a soft landing as opposed to the hard landing markets were worried about late last year," said Bart Melek, head commodity strategist with TD Bank Financial Group.
But a divergence between China's official sentiment index of purchasing managers and HSBC's private-sector factory data reminded investors of the fragile state of the global economy.
"The Chinese (data) was reasonably positive and when you look at more than one day's data the majority of data is reasonably encouraging for north America," said Neil Buxton, managing director at ThomsonReuters-GFMS Metals Consulting.
"Obviously you've got the debt issue (in Europe) but the other side of the coin is we're in a low interest rate environment which in theory should boost consumer expenditure and the construction sector in particular," he added.
U.S. data out on Thursday clouded the economic outlook, but was not enough to dislodge the view that the world's largest economy was slowly recovering.
Growth in U.S. manufacturing unexpectedly cooled in February and consumer spending was flat in January for a third straight month, overriding the positive impact from jobless claims numbers, which held near four-year lows suggesting the labor market is gaining momentum.
"The U.S. data, while not fantastic, is significantly better than other parts of the world," Great Pacific Wealth's McGillivray said.
"It shows that the economy is picking up some sort of measurable steam."
In Europe, data showed factory activity was stagnant at best in February, as leaders wrestled with the balance between budget austerity and reviving lost growth at the first summit for two years in which the euro zone debt crisis did not eclipse all else.
"At the moment, the focus is very much on policy decisions but we would note that there are interesting industrial metals specific factors working in the background," Credit Suisse said in a research note.
It pointed to cancelled warrants, or inventories already earmarked for delivery, at the LME, which continue to rise.
"This suggests that physical demand is higher than many market participants believe. We expect the price path in the coming days to be volatile," Credit Suisse said. "Nevertheless, price risks are to the upside."
Copper stocks in warehouses monitored by the LME fell to a 2-1/2 year low of 292,250 tonnes, down 4,175 tonnes, data on Thursday showed. The ratio of cancelled warrants to total stocks stood at 32.2 percent, with most of the tonnage in U.S. locations.
Global miner Rio Tinto said it expected the copper market to stay tight despite growth in supply, with the company anticipating rising costs and supply disruptions to continue, following strikes last year.
Rio, which is looking to sell most of its Australia and New Zealand aluminium business, remained bearish on the aluminium market, with smelters facing a margin squeeze as costs rise and aluminium prices remain weak.
Aluminium ended up $23 to end at $2,353 a tonne.
Metal Prices at 1918 GMT
Metal Last Change Pct Move End 2011 Ytd Pct
move COMEX Cu 392.65 4.95 +1.28 343.60 14.28 LME Alum 2353.00 23.00 +0.99 2020.00 16.49 LME Cu 8628.00 129.00 +1.52 7600.00 13.53 LME Lead 2162.50 2.50 +0.12 2035.00 6.27 LME Nickel 19495.00 240.00 +1.25 18710.00 4.20 LME Tin 23770.00 145.00 +0.61 19200.00 23.80 LME Zinc 2105.00 -7.00 -0.33 1845.00 14.09 SHFE Alu 16195.00 -55.00 -0.34 15845.00 2.21 SHFE Cu* 60290.00 -780.00 -1.28 55360.00 8.91 SHFE Zin 15890.00 -250.00 -1.55 14795.00 7.40 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07
(Additional reporting by Maytaal Angel in London; editing by William Hardy and Bob Burgdorfer)