* U.S. dollar hits over seven-week peak, pressuring metals

* Copper stocks in LME warehouses highest since January

BANGALORE, May 18 (Reuters) - London copper slipped on Thursday after rebounding from 5-1/2-month lows in the previous session, as a sturdy dollar and demand concerns from top consumer China overshadowed optimism about a deal to extend the U.S. debt ceiling.

Three-month copper on the London Metal Exchange was down 0.3% to $8,279.50 a tonne at 0754 GMT, having hit its lowest since Nov. 30 on Wednesday but ending over 2% higher in its best one-day percentage rise since January.

The most-traded copper contract on the Shanghai Futures Exchange climbed 2.2% to 65,760 yuan ($9,513.75) a tonne.

"Copper is used by financial players as a risk on/off product as well ... So it got a bid together with U.S. equities last night after news broke that Biden is about to achieve getting the debt ceiling raised," said a Singapore-based metals trader.

U.S. President Joe Biden and top U.S. congressional Republican Kevin McCarthy on Wednesday expressed optimism over reaching a deal to raise the federal government's debt ceiling, that if breached could push the U.S. economy into a recession.

The dollar strengthened, making commodities priced in the U.S. currency more expensive.

"From the fundamental standpoint, there is also a lack of strong momentum: while production from China continues to improve, consumption remains lacklustre, resulting in building inventories for end-users," Sucden Financial said in a daily report on base metals.

In top metals consumer China, recent data showed industrial output and retail sales grew slower than expected last month, reinforcing concerns of a spillover into the wider global economy and a drop in demand for metals.

Copper prices are down nearly 15% from a seven-month high of $9,550.50 a tonne hit in January and broke below their 200-day-moving average on May 11, a bearish sign.

Further pressuring prices, copper stocks in LME-registered warehouses have climbed to their highest levels since early January.

In other metals, LME aluminium rose 0.3% to $2,302.50 a tonne, nickel fell 0.4% to $21,175, zinc lost 0.6% to $2,507.50, tin added 0.2% to $24,965, while lead was up 0.1% at $2,056.

($1 = 6.9121 Chinese yuan) (Reporting by Swati Verma in Bengaluru; Editing by Sohini Goswami and Mark Potter)