LONDON: Copper rallied to its highest in more than two weeks on Friday after a series of improving US and Chinese economic data triggered short-covering and investors were more optimistic that European leaders were closer to a plan on the euro zone debt crisis.
Three-month copper on the London Metal Exchange closed at $7,545 a tonne, up by 3.2 percent from Thursday's close of $7,310.
The metal used in power and construction earlier hit $7,580.25, its highest since Sept. 27 and up by 14 percent from a 2011 trough early this month, when fears of a Greek debt default battered markets.
Prices maintained gains following Chinese inflation figures that suggested its central bank may pause from its tightening cycle, and despite a mixed bag of results from the US
But support was also coming from hope a resolution may soon be coming to the Europe debt crisis, analysts said.
"The focus is really on the sovereign debt situation in Europe," said strategist Leon Westgate at Standard Bank. "I think until you get a bit more clarity there, the metals will continue to trade quite technically," he added.
Westgate said that the industry and investors might be squaring positions ahead of what could be more comments by European officials this weekend on bank recapitalisation and before the next round of quarterly reports from big banks such as Goldman Sachs next week.
US retail sales grew at the fastest pace in seven months in September as consumers shook off concerns about a weak stock market and political gridlock, giving some momentum to the economic recovery.
Consumer sentiment, however, unexpectedly slipped in early October as worries about declining incomes drove a measure of expectations to the lowest level in more than 30 years.
China's consumer inflation dipped to 6.1 percent in September, sparing policymakers a jump in price pressures while they fret about slower growth, although stubborn food price rises showed Beijing's fight against inflation was not over.
The inflation data, coupled with soft trade figures released on Thursday and recent concerns over China's cash-strapped small and medium enterprises, seemed to support the belief that Beijing would put its tightening policy on hold for the moment.
China is the world's largest copper consumer, accounting for nearly 40 percent of global demand estimated this year at around 20 million tonnes.
But the euro zone's finances remained a worry to investors as ratings agency Standard and Poor's downgraded the long-term credit rating of Spain by one notch to AA- from AA with a negative outlook. It cited Spain's weak growth, tightening fiscal conditions and high private sector debt.
The euro and European and US shares gained after the data.
G20 MEETING
G20 finance chiefs and central bank heads meeting in Paris on Friday urgently need to find a convincing solution to a deepening euro zone debt crisis, which has fanned fears of a global slide into recession.
German Chancellor Angela Merkel and French President Nicolas Sarkozy late last week said they would announce a plan to solve the euro zone debt crisis by the end of the month.
"The next really big issue is the so-called comprehensive plan from Merkel and Sarkozy at the end of October. That is the big risk here," Danske Bank analyst Arne Lohmann Rasmussen said. "The buyers could be disappointed if they cannot deliver what they promised."
Also supportive to copper prices were lower inventories of the metal at LME warehouses. Latest data showed stocks down 2,900 tonnes to 450,200 tonnes, still about a third higher since last December.
Copper inventories in warehouses monitored by the Shanghai Futures Exchange rose 1.8 percent from Sept. 30, the exchange said on Friday. Aluminium stocks rose 51.4 percent.
The rise in aluminium stocks followed months of steady declines since the start of the year, with inventories hitting an all-time low of around 77,000 tonnes on Sept. 30.
Short-selling, a popular target in volatile and rumour-riddled markets, has been blamed by aluminium producer Alcoa's chief executive for a big fall in the price of the metal and with it the company's share price.
Falling European aluminium premiums reflect concerns over a potential 2012 economic slump, but German industrial demand and financing deals are buttressing demand for now, traders said on Thursday.
Three-month aluminium was not traded on the kerb close but bid at $2,220 from a close of $2,207 a tonne on Thursday.
Zinc closed at $1,930 from $1,923.5 a tonne while battery material lead ended at $2,026 from $2,036 a tonne.
Tin changed hands at $21,800 from $21,950 a tonne and nickel was $18,875 from $18,455 a tonne.
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