Copper prices reached their highest since April 7 on Friday as rising Chinese stock markets and strong European manufacturing data prompted investors to bet on higher prices. Zinc meanwhile was on track for its biggest weekly gain since November as inventories continued to fall, raising supply fears.
"Chinese PMI figures in a week are important to show whether this recovery is sustainable," said Peter Fertig, a consultant at Quantities Commodity Research. London Metal Exchange copper closed up 1 percent at $5,800 a tonne after earlier touching a 2-1/2 month high of $5,854.50. The metal used in power and construction was on track for its best week since mid-March and closed above the technically important 200-day moving average of $5,773, setting the scene for further gains next week, said Sucden analyst Kash Kamal.
European manufacturing PMIs beat expectations and climbed to a more than six-year high, but US factory data disappointed. Blue-chip stocks closed at an 18-month high, boosting optimism about the world's largest consumer of industrial metals, after MSCI's decision to include Chinese shares in a key index this week. The US currency weakened, supporting dollar-denominated metals by making them cheaper for holders of other currencies. Chinese imports of refined metals fell in May.
Three-month zinc finished up 0.2 percent at $2,704 a tonne and was on track for a weekly gain of around 7 percent, the most in seven months. The metal is trading at three-month highs and fundamentals justified a rise to just under $3,000, said Bank of America Merrill Lynch in a note.
Cancelled warrants - metal earmarked for delivery - in LME-registered warehouses rose to 73 percent after 22,575 tonnes of new cancellations. Total stocks have fallen by about 30 percent since January to 301,900 tonnes, the lowest since 2009. Warrant cancellations were focused in LME warehouses in New Orleans, indicating that speculators rather than real demand were responsible, Commerzbank analysts said in a note. "We therefore regard the response of the zinc price as exaggerated," they said. Zinc has moved above its 100-day and 200-day moving averages this week, stimulating technical buying.
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