Copper rose more than 6 percent to a two-week high on Thursday, as upbeat data from China boosted the outlook for metals demand and a deal by European leaders to support debt-laden Greece helped lift risk appetite. Benchmark copper for three-months delivery on the London Metal Exchange closed at $6,940 a tonne from a finish at $6,540 on Wednesday.
The metal, used in power and construction, earlier hit $6,970, its highest since January 28. A late flurry of buying was triggered by copper's break through the 100-day moving average. The breach also sparked a bout of buying by funds using black box models to generate buy or sell signals.
Data from China, the world's top metals consumer, showed banks made a stronger than forecast 1.39 trillion yuan of loans in January, while consumer inflation moderated more than expected in the year to January. "It's a China story. The data was seen as positive in terms of risk sentiment," said Daniel Smith, an analyst at Standard Chartered.
"It was seen as being strong and fuelled a rally across base metals. The move above the 100-day moving average also helped." European leaders said they were ready to support Greece to stave off a crisis in the eurozone, sparking a rally in equities and commodities. But confidence across markets cooled a little and the dollar turned higher against the euro as investors grew disappointed by a lack of detail on how aid would work.
European leaders suggested the package could include some form of loans to Greece to help it service its debt and avoid a damaging default. Also helping copper, with the arbitrage or premium for Shanghai copper over LME still open, Chinese import buying is holding up well. Latest LME data showed cancelled warrants - material set to leave warehouses - jumped to 6,350 tonnes from 3,850 on Tuesday. Boosting metals, global miner Rio Tinto posted a bigger than expected first-half profit and was cautiously optimistic on the commodity market outlook.
BHP also beat forecasts when it posted results on Wednesday, but was more wary about global recovery, holding off from a share buyback. Aurubis, Europe's biggest copper smelter, forecast an improved operating profit this year. "Risk appetite is improving as a resolution to the Greece problem is contemplated, the resource equities are coming out with decent results and there's very strong demand from China for metals like copper," Daniel Brebner, analyst at Deutsche Bank, said of the rally in base metals. Copper prices have declined nearly 10 percent this year, partly reversing last year's 140 percent surge, on worries over Chinese monetary tightening, sovereign debt in Europe and proposed changes to banking regulation in the United States.
While some concerns, notably the Chinese ones, have been partially mitigated by Thursday's data, not all analysts are optimistic over the longer term outlook for the metal, given prices are inflated by last year's gains. Among other industrial metals, aluminium closed at $2,065 a tonne from $2,030. Latest LME data showed stocks fell 4,950 tonnes but held near record levels at 4.56 million tonnes.
Nickel stocks rose 330 tonnes to 166,356, near their highest ever levels, but against that, cancelled warrants rose to 3,648 from 3,468 on Tuesday, indicating demand might be improving. Nickel closed at $18,450 a tonne against $17,710. It earlier hit a two-week high of $18,600. Zinc closed at $2,180 from $2,114, while battery material lead was at $2,125 a tonne from $2,045. Soldering metal tin was at $16,175 from $15,700.
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