* Cash copper at $8 premiums to three-month prices * Concerns linger about demand outlook from China * COMING UP: U.S Michigan sentiment for Feb at 1455 GMT By Harpreet Bhal LONDON, Feb 24 (Reuters) - Copper steadied on Friday, with the metal on track to post its biggest weekly gain in a month, but caution about the outlook for economic growth and demand from top consumer China kept investors cautious. Benchmark copper on the London Metal Exchange (LME) rose 0.1 percent to $8,401 by 1018 GMT, from Thursday's close of $8,390 a tonne. The metal used in power and construction is up more than 2 percent for the week so far, its biggest gain since the last week of January, after a commodity-wide rally on Tuesday as Greece secured its second bailout package. Copper is up around 11 percent so far this year, although investors are finding fewer reasons to stretch the rally with the European economy heading back into recession and manufacturing activity in top copper user China continuing to shrink. Gains have been partly buoyed by hopes demand from China - which consumes 40 percent of the world's copper - would pick up after the Lunar New Year in January. But demand from the commodity consuming giant has remained slack, raising worry that prices could retreat sharply. "There is a lot of anticipation of imminent demand from China. It's not clear yet that there has been any pickup in demand since the end of the new year, which is troubling," said Nic Brown, head of commodity research at Natixis. Underscoring weak Chinese physical demand, stocks in Shanghai warehouses hit their highest level in nearly a decade last week, and dropped by just more than 1,000 tonnes to 216,086 tonnes this week. But the LME copper market is reflecting a lack of nearby supply, with cash copper soaring to an $8 premium, against three-month prices, from a $15 discount last week. . "It strikes me as the market anticipating some sort of shortage. We expect there to be substantial deficit in the copper market this year, in the region of 280,000 tonnes. The only reason you didn't see that kind of deficit last year is because there was substantial destocking in China," Brown said. "It will be interesting to see how any kind of anticipation of physical shortages by the LME market will square with what the reality is on the ground in China where it does not look like there is any strength in demand just yet." Traders questioned whether the tightness was a bullish indicator or a result of technical factors such as short covering, given the lack of demand from China. EURO GAINS The euro rose to a fresh 2-1/2 month high against the dollar, continuing gains after improved German business sentiment data the previous day and as traders targeted a reported options barrier. A weak dollar makes commodities priced in the U.S. unit cheaper for holders of other currencies. Lingering concerns about the euro zone debt crisis also kept the market cautious. Greece launches a bond swap on Friday, the first step towards securing funds from the 130 billion euro bailout package agreed earlier this week, while domestic growth stays hobbled by harsh austerity measures and opposition in Germany grows. "Looking ahead, attention will be directed to the G20 summit this weekend and no doubt, the European economic situation will feature heavily at the conference," ANZ analysts said in a note. "Rising oil prices could also get some airplay, with higher oil prices beginning to be a concern for world leaders." In other metals, aluminium rose to $2,290 a tonne. It was untraded at the close on Thursday's, but bid at $2,273 a tonne. Zinc climbed to $2,070.25 from a close of $2,048 a tonne, while lead was at $2,172 from $2,165 a tonne. Tin was at $24,050 from Thursday's close of $24,195 while nickel rose to $20,078 from $20,000. Metal Prices at 1021 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2010 Ytd Pct move COMEX Cu 381.25 0.65 +0.17 444.70 -14.27 LME Alum 2288.50 8.50 +0.37 2470.00 -7.35 LME Cu 8397.50 7.50 +0.09 9600.00 -12.53 LME Lead 2171.50 6.50 +0.30 2550.00 -14.84 LME Nickel 20053.00 53.00 +0.27 24750.00 -18.98 LME Tin 24063.00 -132.00 -0.55 26900.00 -10.55 LME Zinc 2069.00 21.00 +1.03 2454.00 -15.69 SHFE Alu 16160.00 -65.00 -0.40 16840.00 -4.04 SHFE Cu* 59620.00 -800.00 -1.32 71850.00 -17.02 SHFE Zin 15805.00 -60.00 -0.38 19475.00 -18.84 ** Benchmark month for COMEX copper * 3rd contract month for SHFE AL, CU and ZN SHFE ZN began trading on 26/3/07

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