Copper rose more than 6 percent on Friday, its strongest daily gain in 18 months, as economic stimulus moves by central banks raised investor confidence over growth of industrial metals demand. Better-than-expected jobs growth in the United States gave copper an extra push, and propelled other markets, including Brent crude and US and European equities, higher.
Benchmark copper on the London Metal Exchange closed at $7,265 per tonne from a close of $6,848 on Thursday. It rose more than 6 percent, its biggest daily rise since late October 2011, to hit an intraday high of $7,289 per tonne. "Base metals are seeing a wave of short covering here on the back of non-farm payrolls - copper is leading the way," a metals trader said.
The LME will be closed on Monday for a UK bank holiday. US employment rose more than expected in April, pushing the unemployment rate to a four-year low of 7.5 percent, which could help ease concerns of a sharp slowdown in the economy. "It was surprisingly positive. This shows the job market and the economy in general appear to be more resilient than investors had feared," said Joe Manimbo, an analyst at Western Union Business Solution in Washington.
The positive sentiment was established earlier this week. On Thursday the European Central Bank (ECB) cut interest rates for the first time in 10 months, a day after the US Federal Reserve committed to continuing its $85 billion monthly bond-buying programme to bolster growth. In a bid to spur lending, the ECB said it was also "technically ready" to cut its deposit rate from the current zero percent into negative territory, meaning it would start charging banks for holding their money overnight.
"The market is finally pricing in the fact that the ECB is aligning itself with the Fed and the Bank of Japan, pushing away deflationary worries," said T-Commodity consultancy Gianclaudio Torlizzi. "The ECB action is very important and if you tie this with the fact that commodities have been oversold lately it creates the conditions for a strong rebound. We expect copper to move towards $8,000 by the end of June."
But some are wary of whether the price gains will be sustainable. "It's encouraging that central banks are willing and able to provide the liquidity needed to get out of the slump but by and large people are still worried about the message behind them, that growth is not satisfactory," said Sijin Cheng, commodities analyst at Barclays.
Also supporting copper was an outflow of the metal from LME-registered warehouses in the last two weeks after a six-month rise, which could signal an improvement in demand from consumers of the metal. "Although one swallow does not make a summer ... we nonetheless believe that the inventory trend reversal could also support a shift in sentiment among market players, who are currently assuming a massive copper production surplus of over 400,000 tonnes," Commerzbank said in a research note.
Barclays' Cheng said she still expects physical demand in China, the world's biggest consumer of copper and other base metals, to improve during the second quarter, which should provide further support to prices. In other metals, zinc closed at $1,885 from $1,819 on Thursday, lead at $2,038 from $1,941 and nickel at $15,200 from $14,675. Aluminium, untraded at the close, was bid at $1,882 from a last bid of $1,811 on Thursday, and tin, also untraded, was bid at $20,450 from $19,675.
