Copper rose more than five percent to a two-week high on Wednesday after central banks around the world announced co-ordinated global action to provide liquidity to the financial system. Other base metals also rose significantly as the liquidity boost prompted investors to buy assets perceived as more risky such as metals.
The market was also reassured by higher than expected private sector jobs growth in the United States in November, pointing to a pickup in the country's labour market. "The central banks action has been the big mover today," said Randy North, a trader at RBC Capital Markets.
"The big question is whether this will be enough to help the market in the next few days. If I was a guessing man I would say that it's not enough to turn sentiment in a big way. Will have to wait and see whether the Chinese come and buy tomorrow." The central banks of the United States, eurozone, Japan, Canada, Britain and Switzerland moved to provide liquidity to the financial system, lowering the price on existing dollar swaps.
Benchmark copper closed at $7,885 a tonne, more than 5 percent up from a close at $7,490 on Tuesday. The metal used in power and construction was on course for its biggest daily gain in more than a month. Zinc hit a session high at $2,112 a tonne, its highest in more than a month and almost 8 percent up from the close on Tuesday. Lead, aluminium and nickel also hit peaks about 5-6 percent higher than their close on Tuesday.
The market had earlier risen on a move by China's central bank to cut the reserve requirement ratio of its banks by 50 basis points to ease credit strains and shore up activity in the world's second-largest economy.
"This (move by China) is a very significant development. It represents the beginnings of a move towards easier money in China where there had been a tightening of monetary conditions since early 2010," said Nic Brown, analyst at Natixis. Reflecting a rise in risk appetite the dollar fell against the euro and a basket of currencies. A weak dollar boosts commodities such as base metals priced in US dollar as it makes these assets cheaper for holders of other currencies.
With the eurozone debt crisis showing no signs of abating, investors worry about the longer-term outlook for economic growth and for metals' demand in countries such as China. Focus is turning to a European Union summit on December 9, with Germany and France working to propose a more rapid European fiscal integration, while Germany's opposition to an expanded role of the European Central Bank in lending to the region's financially strapped economies has hurt market sentiment.
"Market participants are still showing little confidence in policymakers' efforts to tackle the debt crisis and growth fears would not evaporate overnight," Andrey Kryuchenkov, analyst at VTB Capital said in a note. In other metals, nickel finished at $17,500 from a $17,0 close on Tuesday; aluminium closed at $2,110 a tonne from a close of $1,996 a tonne on Tuesday. Zinc ended at $2,072 from a close of $1,958; tin finished at $20,900 from $20,550. Lead closed at $2,110 from $2,031.
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