LONDON: Copper edged lower on Tuesday as rising COVID-19 cases and weak factory activity in China put the brakes on a rally that took prices to a five-month high on Monday.

Copper surged more than 10% in the first two weeks of November as expectations for an easing of Chinese COVID controls and slower U.S. interest rate rises fuelled hopes that economic growth and metals demand would improve.

But China, the biggest metals consumer, is not out of the woods yet. Daily COVID infections topped 5,000 for the first time, raising fears that localised lockdowns could widen. Data meanwhile showed slower-than-expected manufacturing growth in October and the first fall in retail sales in five months.

JPMorgan cut its economic growth forecast for China this year to 2.9%.

Benchmark copper on the London Metal Exchange (LME) was down 0.1% at $8,370.50 a tonne at 1210 GMT after reaching $8,600 on Monday.

Despite recovering some ground in recent months, prices of the metal used in power and construction are down more than 20% from a peak of $10,845 in March.

Nickel jumps 15% to highest since May in illiquid trade

“The market is saying, hang on we need to slow down a bit,” said Saxo Bank analyst Ole Hansen, adding that some investors were selling to take profits on recent price gains.

He said prices were likely to consolidate before rising further in the new year as China brings COVID cases under control.

In a sign of improved supply, cash copper on the LME flipped to a $16 discount versus the three-month contract from a premium of more than $100 through much of September and October.

Supporting metals prices was a continuing decline in the U.S. dollar, which makes dollar-priced metals cheaper for buyers with other currencies.

LME aluminium was up 0.1% at $2,456 a tonne, zinc rose 1.1% to $3,165, nickel gained 2.6% to $29,600, lead rose 0.8% to $2,208.50 and tin was up 7% at $23,570.