Copper rose towards a five-month high on Thursday, boosted by firmer equity markets and
expectations that the G20 heads in London will craft a response to the worst economic downturn since the 1930s.
By 1103 GMT, copper for three-month delivery on the London Metal Exchange rose to $4,150 a tonne versus Wednesday's closing price of $4,060.
Investors anticipated an agreement from a summit of the world's richest and biggest developing economies, meeting on Thursday to address the worst downturn in decades.
European shares rose sharply, offering the possibility that there could be greater demand for industrial metals, on renewed suggestions that the economic downturn may be moderating.
"Certainly the markets took on a positive tone yesterday and that's continuing this morning," said John Meyer, an analyst at investment bank Fairfax. "Markets are looking forward to
agreement from the G20 summit and to the potential impact it might have on recovering the economic situation."
Industrial metals were buoyed on Wednesday by a flurry of U.S. data, showing a modest rise in pending sales of existing homes, the contraction in factory activity slowing and U.S. construction spending falling at a slower-than-expected rate.
But prices of copper, used in power and construction, have fallen about 50 percent since a record high of $8,940 in July 2008.
TAILWIND
"Better-than-expected economic data in the USA, a weaker U.S. dollar and friendly equity markets have given tailwind to metal prices," Commerzbank analyst Eugen Weinberg said in a
note.
A weak U.S. currency makes metals priced in dollars less expensive for holders of other currencies.
But larger copper gains were capped by a rise in LME inventories of 5,200 tonnes to 506,975 tonnes.
Aluminium, used in transport and packaging, rose to $1,420 versus $1,385 a tonne on Wednesday.
On Wednesday, aluminium cancelled warrants — material earmarked for delivery — rose to 88,275 tonnes from 92,675 the day before. This compares with 10,575 tonnes on Jan. 12 and
leaves LME stocks at 3.47 million tonnes.
"We are seeing continued Chinese or Far East enquiries for physical material," said James Roberts, a broker at Sucden Financial. "The market is making hard work of trying to follow a
trend."
"One minute it's the stock market, next it's a technical break — it's very difficult to trade it concisely," he added.
Steel-making ingredient nickel hit a high of $10,540 before easing back to $10,450 from $10,100 while battery material lead rose to $1,277 but was last at $1,264 from $1,220.
"There hasn't really been any key fundamental news overnight," said Sudakshina Unnikrishnan, an analyst at Barclays Capital on nickel. "Prices have been pretty much range-bound. The general macro picture has been a key driver in the markets."
Zinc gained to $1,342.5 a tonne from $1,312 and tin edged up to $10,790 from $10,450.
But in a reminder to investors of the dire economic backdrop, Japan's Mitsui Mining and Smelting Co said it plans to produce 5.2 percent less zinc in April-September than a year
earlier, reflecting a slump in demand for the metal.
