Copper and aluminium prices rebounded on Thursday, lifted by a strong euro and better-than-expected US data that boosted the outlook for growth, but slow demand from top consumer China may keep further gains in check. Three-month copper on the London Metal Exchange closed 1.0 percent higher at $7,765 a tonne after shedding 1 percent on Wednesday. Aluminium gained 1.3 percent to finish at $1,979 a tonne.
Although copper has rebounded off three-month lows hit last week, prices are still trading 1.9 percent lower in the year to date after the metal used in power and construction shed more than 4 percent in February. Investors were encouraged on Thursday after data showed the number of Americans filing new claims for unemployment benefits unexpectedly fell last week.
"It's a very encouraging number. It shows now that we have a few consecutive weeks where new claims are at this lower trend," said Russell Price, senior economist at Ameriprise Financial Services in Michigan. Data on Wednesday that showed US private employers hired more workers than expected in February and demand for a range of factory goods was solid in January.
Investors are likely to pay close attention to US non-farm payrolls data due on Friday, seen as a key labour market indicator for the world's largest economy. "As far as the US is concerned there are clearly a lot of things that are positive," said Nic Brown, head of commodity research at Natixis.
"The housing market is clearly improving and that will have a knock-on effect but equally the whole question of fiscal retrenchment will be a serious drag to growth for some to time." Also helping lift prices was a rise in the euro against the dollar, which makes commodities priced in the US dollar cheaper for holders of other currencies. The single currency rallied against the dollar after the European Central Bank President Mario Draghi gave no hints about monetary policy easing in the months ahead after leaving its benchmark interest rate unchanged at a record low 0.75 percent.
Brown at Natixis said base metals were unlikely to show significant gains until the market sees clear signs of strong demand from top consumer China, where recent tighter measures for the property market have acted as a drag on copper prices. "We would expect copper buying (from China) to increase more strongly if prices reach closer to USD7,500/t, but there are signs of some traders buying on the dips," ANZ analysts said in a note.
All eyes were on the outlook for demand from China, which accounts for 40 percent of global copper consumption, after consumption slowed last month ahead of the week-long Lunar New Year holiday. China's new leadership meet this week and markets are closely watching their policy announcements for potential impact on metals demand. So far these include allowing more flexibility in the yuan's exchange rate and prioritising urbanisation. Tin climbed 0.8 percent to close at $23,655 a tonne and zinc ended 0.8 percent higher at $1,990. Lead added 0.9 percent to finish at $2,211 a tonne while nickel rose 0.8 percent to $16,650.
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