* LME prompt-to-3-month spread at $17.75 backwardation * Shanghai copper stocks rise on week to decade-high * LME copper technical signals neutral * Coming up: U.S. industrial production, Feb; 1315 GMT (Adds details; updates prices) By Rujun Shen SINGAPORE, March 16 (Reuters) - Copper firmed on Friday, supported by an improved U.S. economic outlook, although worries about demand from top consumer China amid higher Shanghai stocks is likely to weigh on sentiment. Optimism stemming from upbeat U.S. employment and manufacturing data drove the S&P 500 to its highest since the 2008 financial crisis and pushed London copper up more than 1 percent on Thursday. But the ever-growing copper stocks in Shanghai cast a shadow on the otherwise positive sentiment in the market. Copper stocks at warehouses monitored by the Shanghai Futures Exchange rose for the third consecutive week to 227,276 tonnes by March 15, the highest level since July 2002. CU-STX-SGH "The sentiment in London remains strong, while Shanghai is less so as domestic investors are concerned about the weak performance in the stock market and the high copper stocks that will take a while to digest," said Zhou Jie, an analyst at China CIFCO Futures. In contrast to Shanghai's continuously growing copper stocks, LME stocks fell every day since Feb. 22 to 267,750 tonnes by March 14, the lowest since June 2009. MCUSTX-TOTAL The prompt-to-three-month spread on LME copper MCU0-3 closed at a backwardation of $17.75 a tonne on Thursday, a level unseen since end of February, suggesting tightness in the physical market. This echoes the high ratio of cancelled warrants against total stocks, which has been above 30 percent since the end of February, and shows a large portion of the stockpiles was being tagged for delivery. Three-month copper on the London Metal Exchange was little changed at $8,569.25 a tonne by 0751 GMT, after zigzagging in a range of $8,400 to $8,600 this week. Copper was headed for a weekly gain of 0.8 percent. The most-traded June copper contract on the Shanghai Futures Exchange closed up 0.6 percent at 60,780 yuan a tonne, chasing Thursday's gains in London and up 1.3 percent for the week. Technical analysis suggested that signals have turned neutral for LME copper for the day, said Reuters market analyst Wang Tao. A tighter supply outlook also supported copper prices. Freeport McMoran Copper & Gold Inc said first-quarter copper output would be down by about 10 percent because of labour-related problems at its Grasberg mine in Indonesia -- the world's second biggest copper mine -- which will not return to full production until the second quarter. Traders said the news was certainly supportive of copper prices, but the firm's output downfall is unlikely to cause global supply shortage any time soon. LME copper has risen more than 12 percent so far this year, benefiting from brightened global economic outlook and increased liquidity across markets as central banks around the world ease credit curbs to spur growth. Copper's price gain comes despite a shaky outlook for demand from top consumer China. Premier Wen Jiabao said on Wednesday China must embrace slower growth and bolder political reform to keep its economy from faltering, and also dampened hopes for any near-term relaxation of curbs in the property sector. "Consumption in March is better than January and February, but the pace of recovery is not even close to the same period in past years," said a Shanghai-based trader. "April will see further improvement, but the question is how significant it will be." Base metals prices at 0751 GMT Metal Last Change Pct Move YTD pct chg LME Cu 8569.25 4.25 +0.05 12.75 SHFE CU FUT JUN2 60780 360 +0.60 9.79 HG COPPER MAY2 389.60 -0.15 -0.04 13.39 LME Alum 2259.00 8.00 +0.36 11.83 SHFE AL FUT JUN2 16260 -20 -0.12 2.62 LME Zinc 2093.25 3.25 +0.16 13.46 SHFE ZN FUT JUN2 15980 105 +0.66 8.01 LME Nickel 19363.00 -12.00 -0.06 3.49 LME Lead 2131.75 11.75 +0.55 4.75 SHFE PB FUT 16015.00 165.00 +1.04 4.78 LME Tin 23738.00 63.00 +0.27 23.64 LME/Shanghai arb^ 2622 Shanghai and COMEX contracts show most active months ^ LME 3-month copper in yuan, including 17 pct VAT, minus SHFE third month

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