* NY trading stabilizes after Tuesday's 'fat finger'
* March Shanghai copper extends gains, hits 4-mth high
* Prospect of purchases by state reserves boosts prices
SINGAPORE/NEW YORK, Dec 26 (Reuters) - Shanghai copper futures rose to four-month highs and U.S. prices extended recent gains on Thursday on growing confidence about the global economy, year-end covering and the prospect of purchases from China's state reserves.
Strong U.S. economic data on Thursday and a bullish growth forecast for China, the world's No. 1 consumer, fuelled hopes about stronger demand for copper and other industrial metals.
The number of Americans filing new claims for unemployment benefits fell last week to the lowest level in nearly a month, a hopeful sign for the labor market. Initial claims for state unemployment benefits decreased 42,000 to a seasonally adjusted 338,000, the Labor Department said.
Citing an improving labor market, the Federal Reserve last week said it would reduce its monthly $85 billion bond buying program by $10 billion starting in January.
"The jury's still out, but the Fed decision to taper last week was a vote of confidence, not just for the U.S. economy but for the global economy," Adam Sarhan, president at Sarhan Capital, a New York-based financial advisory.
In New York, the most-active COMEX March copper contract settled at $3.3985 per lb, up 0.7 percent and close to Tuesday's peak, which was the highest since April.
On Tuesday, a big, errant 'fat finger' buy order sent prices soaring over 2 percent in a matter of minutes to their highest in more than seven months.
"The fact that it's still holding suggests it was the beginning of sustained new buying," said Sarhan.
The London Metal Exchange is shut on Thursday for the Boxing Day holiday.
The markets rebuffed a stronger dollar. A healthier dollar makes it more expensive to buy dollar-denominated commodities. U.S. equities were also higher.
Up for a fifth straight session, the most-active March copper contract on the Shanghai Futures Exchange ended 0.38 percent higher at 52,210 yuan ($8,601) a tonne hitting 52,770 yuan - its highest since late August.
China's growth is likely to come in at 7.6 percent this year, just above the government's target of 7.5 percent, according to a cabinet report cited by the official Xinhua news agency.
The State Reserves Bureau (SRB) is working on plans to buy about 300,000 tonnes of copper and 100,000 to 150,000 tonnes of nickel in 2014 to take advantage of weak international prices.
"Market sentiment is still positive ... brought about by news of SRB's intention to purchase copper. So any good news could bring prices into an upward trend," Chunlan Li of consultancy CRU in Beijing said in an email.
The potential purchases by the SRB would be equivalent to two-thirds of the copper stocks and could boost prices of the metal, which have fallen 8 percent on the LME and Shanghai this year on declining demand from top consumer China.
Investors remain concerned about the potential impact on demand from the country's cash crunch even as constricted supplies have eased.
Three month LME copper
Most active ShFE copper
Three month LME aluminum
Most active ShFE aluminum
Three month LME zinc
Most active ShFE zinc
Three month LME lead
Most active ShFE lead
Three month LME nickel
Three month LME tin