Metal prices on the London Metal Exchange (LME) closed in negative terrain on Thursday after investors fled commodities after a flow of bearish economic data, analysts said.
"It's macro-related risk reduction, including weaker than expected manufacturing data in the United States as well as comments from the Fed yesterday on the prospects of higher interest rates," analyst Ingrid Sternby at Barclays Capital said. At one point copper and zinc fell by around 7 and 8 percent, respectively after oil and gold dropped in a further flight from risk by investors.
US ISM manufacturing data for May indicated that the economy is starting to cool on higher commodity prices and interest rates.
European mining shares were also hit on concerns over higher interest rates following comments on inflationary risks from the Federal Reserves minutes. These factors sent copper lower, touching an intra-day low of $7,340, down 6.9 percent, before closing the kerb at $7,640, down $245 or 3.1 percent.
Analysts said prices reflected the lack of speculative buying, with fundamental factors such as rising inventories and labour contracts holding sway. But the bullish sentiment in base metals persisted.
"I have my reservations about the top being seen...every time there's a fall we see more money coming in...that's not going to grind to a halt," said SGCIB analyst Stephen Briggs.
Aluminium, having lost the support provided by the threat of a strike at the world's largest producer Alcoa fell $40 at $2,610. Alcoa had reached a tentative labour deal with the United Steelworkers covering 9,000 workers on Wednesday. Members of the same union ratified a new three-year deal at Inco's nickel operations in Sudbury, Canada. Nickel fell $1,200 or 5.5 percent to $20,550, tin closed at $8,160, down $90, and lead was down $50 at $1,040.