* Data shows contraction in China manufacturing activity * Euro zone business decline steepens unexpectedly - PMI * Euro zone consumer confidence Sep 1400 GMT By Harpreet Bhal LONDON, Sept 20 (Reuters) - Copper slipped on Thursday, retreating from 4-1/2 month highs in the previous session as confidence was shaken by data showing a downturn in business activity in the euro zone service sector and a continued contraction in manufacturing in China. Three-month copper on the London Metal Exchange slipped to $8,206 a tonne at 0933 GMT, down 1.7 percent from Wednesday's close of $8,350 a tonne. Prices had touched their highest since early May in the previous session, supported by a surprise decision from the Bank of Japan (BOJ) to further ease its monetary policy. Manufacturing in China contracted for the 11th month in a row in September, according to a private sector survey of factory managers that indicated the world's second-largest economy remains on track for a seventh quarter of slowing growth. In Europe the downturn in activity in the euro zone's service sector steepened this month at the fastest pace since July 2009, Markit's purchasing managers indexes (PMIs) showed, with French companies performing particularly poorly. The gloomy surveys heightened worries that the European Central Bank's aggressive new bond-buying plan has so far failed to inspire any major improvement in business at ailing euro zone companies. "For copper, the market was stalling for more than three months in a tight range. Then you had QE3 and things improved. But in the long-run you need fundamentals to recover and we need to see an improvement in China," said Andrey Kryuchenkov, analyst at VTB. "I am still upbeat on China's prospects towards the end of the year and I think they will stabilise their growth to maybe below 8 percent. And that is important for metals." Still, China's PMI number, which provides the first glimpse of September's conditions for Chinese industry, seems to point to a month in which a slide was halted but not reversed, suggesting limited downside for prices, Singapore-based analyst Bonnie Liu of Macquarie said. "We do see some things getting better from September as orders filter down into the market. The macro environment is improving and so are orders for cement, steel and copper," she said. "Still prices are not going to move up much because that demand is not that strong ... it's only a seasonal pick up for the fourth quarter." WEAK EURO Adding to pressure for base metals prices was a weak euro, which fell to a one-week low against the dollar following the downbeat euro zone business activity data. A stronger dollar makes commodities priced in the U.S. unit more expensive for those holding other currencies. French business activity took a sharp turn for the worse in September, shrinking at its fastest rate since April 2009 as weak domestic demand and a deepening slowdown in southern Europe dragged the euro zone's No. 2 economy towards contraction. But in Germany, private sector contraction eased in September. In other metals, tin was the worst hit, falling nearly 5 percent at one point to $20,441 a tonne as dollar strength triggered chart-based selling when prices pierced support at the 200-day moving average near $20,800. It later traded at $20,750 a tonne, from Wednesday's close of $21,400. Three-month aluminium was at $2,108 a tonne from Wednesday's close of $2,138 while zinc, used in galvanizing, fell to $2,092.25 from $2,123.50. Battery material lead fell to $2,231.50 from $2,271 and nickel was at $17,640 from $17,755. Metal Prices at 0936 GMT Comex copper in cents/lb, LME prices in $/T and SHFE prices in yuan/T Metal Last Change Pct Move End 2011 Ytd Pct move COMEX Cu 374.25 -7.90 -2.07 344.75 8.56 LME Alum 2109.25 -28.75 -1.34 2020.00 4.42 LME Cu 8199.00 -151.00 -1.81 7600.00 7.88 LME Lead 2232.25 -38.75 -1.71 2034.00 9.75 LME Nickel 17634.00 -121.00 -0.68 18650.00 -5.45 LME Tin 20705.00 -695.00 -3.25 19200.00 7.84 LME Zinc 2093.00 -30.50 -1.44 1845.00 13.44 SHFE Alu 15700.00 -155.00 -0.98 15845.00 -0.92 SHFE Cu* 59310.00 -1130.00 -1.87 55360.00 7.14 SHFE Zin 15535.00 -285.00 -1.80 14795.00 5.00 ** 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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