Industrial metals rallied on Thursday, with nickel and lead jumping over 5 percent at one stage, buoyed by stronger equity markets and expectations that demand for metals would remain robust. European stocks rose for the fifth straight session but closed off highs after US stocks failed to hold to early gains.
Copper for three months delivery on the London Metal Exchange ended at $7,260 a tonne, up $110 from Wednesday's close. In early trade it rose 2.6 percent to an intraday high of $7,335.
"The markets have generally stabilised and that's clearly benefiting the metals," said analyst Stephen Briggs at Societe Generale Corporate and Investment Banking.
"The question is whether this is a sustainable rise...I don't think the bigger problems have gone away," Briggs said. Fears of a global credit squeeze, triggered by concerns about the US subprime mortgage market, hammered financial markets last week and kept investors on their toes.
Sentiment on US stock markets was shaken again on Thursday when the chief executive of Countrywide Financial Corp, the largest US mortgage lender, said the housing market was "certainly not getting better" and could push the economy into a recession.
On Wednesday, the world's biggest miner BHP Billiton, posted a 19 percent jump in second-half earnings on surging sales of copper, iron ore and coal, and pegged future growth to strong Asian demand. The company said near-term commodity prices were expected to remain high and that its customers did not expect a global credit squeeze to have a big impact on demand for raw materials, particularly in China and India.
BHP Billiton shares ended 0.73 percent lower after surging nearly 5 percent in the previous session. Other London-listed miners such as Rio Tinto and Anglo American also turned negative at the close as investors decided to take profits.
Nickel rose 5.4 percent to hit $29,500 before closing at $27,850 down versus Wednesday's 28,000. "There was technical selling and also some profit-taking by short-term traders ahead of tomorrow's important week-end close," an LME trader said, referring to the London market being closed for Bank Holiday on Monday.
Nickel prices have fallen precipitously from a record high of $51,800 in May prompting the stainless steel makers, the main users of nickel, to restock in anticipation of a pick-up in consumer demand later this year.
Three-month lead jumped 5.4 percent to $3,140 and closed at $3,150, up $85. LME stocks fell to a fresh 17-year low of 26,400 tonnes, just over a day of global consumption. "Production problems at Doe Run plus the fact that just one market player is controlling more than 80 percent of all LME lead warrants, point to (a) possible speculative boost to lead prices," Weinberg at Commerzbank said.
Privately owned Doe Run said it had stopped production at its Herculaneum, Missouri, lead smelter for a week to 10 days because of furnace failures that affected both of its blast furnaces.
Three-months tin rose 4.6 percent to touch $15,100 before falling back to close at $14,600/14,650, up $160. Aluminium gained $17 to $2,532 and zinc rose $85 to $3,150.