Copper fell to its lowest in a week on Thursday after US weekly jobless claims fell less than expected, heightening concerns about the world's biggest economy and outweighing a normally supportive weak dollar. Benchmark copper on the London Metal Exchange finished at $8,920 a tonne, from $9,102 a tonne at the close on Wednesday.
Trading volumes were light due to a religious holiday that closed offices in most European countries. The metal used in power and construction hit a session low of $8,905, its lowest in about a week. New US claims for unemployment benefits fell last week, but not enough to assuage fears the labour market recovery has taken a step back. The figures do not bode well for Friday's US non-farm payrolls data.
The small decline in claims fits in with other data ranging from consumer spending to manufacturing, indicating the economy has adopted a decisively weak tone at a time when the Federal Reserve is scheduled to wrap up its $600 billion government bond-buying programme at the end of the month.
"The jobs data is probably a reflection of what is going on in the manufacturing sector, we will know a lot more once we see tomorrow's numbers," said Natixis analyst Nic Brown. "The market is very apprehensive, and it's waiting for payrolls data on Friday to confirm what has been a softer trend in macro data," said Daniel Major, an analyst at RBS. Slower-than-expected manufacturing expansion in top metals consumer China and in the eurozone compounded the negative sentiment.
Mitsui Mining and Smelting Co, Japan's top zinc smelter, for instance, has said it plans to resume operations early this month at its 110,000 tonnes-a-year Hachinohe zinc smelter. "If the drop in manufacturing sentiment is being caused by a shortage of high-tech components and parts, and it's all coming from Japan then I think you can be quite optimistic for the outlook for the next couple of months," Brown said. Inventories of copper on the London Metal Exchange rose 2,650 tonnes to 473,500 tonnes, the highest in a year, data showed on Thursday.
Inventories have been rising steadily since December, adding to nagging worries about lower imports into top consumer China, which is digging into its stockpiles. Summer is a seasonally weak period for metals consumption, and a strong rebound in Chinese imports is unlikely in the next two months, but it could pick up at the end of the third quarter and into the fourth quarter, Major said. Aluminium, untraded at the close, was last bid at $2,616 from a last bid at $2,667 on Wednesday. Zinc, used in galvanising steel, closed at $2,220 from $2,257. Battery material lead was untraded at the close, and was last bid at $2,404 from $2,500 while tin closed at $26,600 from $27,595 at Wednesday's close.
Nickel was $22,550 from $23,250.