LONDON: Copper prices fell on Thursday as weak Chinese factory data and a U.S. Federal Reserve warning on further increases to interest rates fanned fears of weak demand.

Benchmark copper on the London Metal Exchange (LME) was down 1.1% at $8,420 a tonne in official open-outcry trading.

Weakening economic growth and rising interest rates dragged prices of the metal used in power and construction from a record high of $10,845 a tonne in March to as low as $6,955 in July.

Prices have since recovered somewhat as investors look ahead to economic recovery and the end of interest rate hikes, but demand remains weak.

Data showed that in China, the world’s biggest metals consumer, the economy lost more momentum in November as factory output slowed and retail sales extended declines, both missing forecasts.

Some analysts also expect the easing of coronavirus restrictions to cause a huge and potentially disruptive increase in COVID-19 infections.

“We’re going to be in choppy markets for the next few weeks,” said WisdomTree analyst Nitesh Shah.

Copper hits multi-month peak as dollar slides

“But longer term, the supply situation hasn’t changed. It’s super tight. If prices dip too low, there’s an amazing buying opportunity.”

The Fed raised interest rates on Wednesday and forecast more increases next year, pushing the dollar up and pressuring dollar-priced metals by making them more expensive for buyers with other currencies.

The European Central Bank and the Bank of England also raised rates on Thursday in an effort to control inflation.

Stock markets fell.

LME aluminium was down 0.7% at $2,428 a tonne, with data showing output in top producer China rose 9.4% year on year in November.

Zinc fell 0.8% to $3,213 a tonne, nickel was up 1.5% at $28,800, lead slipped 1.8% to $2,142 and tin retreated 3.2% to $23,500.