Copper fell to its lowest since December on Friday as investors' interpretation of China's surprise rate cut shifted from its prospects for boosting demand to fears it could indicate a sharp slowdown in the world's biggest metals consumer.
The metal, seen as a barometer of global economic health, is on track to extend its losing streak to a sixth week, its longest such run in two years.
Three-month copper on the London Metal Exchange traded in official rings at $7,270 a tonne on Friday. It earlier touched its lowest since December 20 at $7,251.25 a tonne.
Copper initially rose on Thursday after China cut rates for the first time since the depths of the financial crisis. On Friday the reaction turned to worries that the cut could signal the impending release of poor economic data.
“China eased yesterday, which has set off more of a panic that the data coming out at the weekend could be pretty grim Markets would like a coordinated round of policy and cuts, but so far it is only China and it's more of a token offering than anything else,” analyst Robin Bhar of Societe Generale said.
“Markets haven't been thrown a lifeline, and the downtrends are still in place. We could get a shot-covering bounce this afternoon, but we may be $50-$100 lower by then.”
Reuters polls published earlier in the week suggested the world's second-largest economy probably showed signs of stabilising last month from a surprisingly weak April, but now those expectations are in doubt.
Federal Reserve Chairman Ben Bernanke said on Thursday the US central bank was ready to shield the economy if financial troubles mount but offered few hints that further monetary stimulus was imminent, disappointing the markets.
Adding to the bearish tone in Europe, German imports tumbled at their fastest rate in two years in April and its exports fell more than expected, indicating that Europe's largest economy is beginning to feel the chill from the euro zone debt crisis.
Spain is expected to request European aid for its ailing banks at the weekend to forestall worsening market turmoil, becoming the fourth and biggest country to seek assistance since the euro zone's debt crisis began, EU and German sources said.
CHINA MAY IMPORTS TO DROP
Data to be released over the weekend includes Chinese industrial production for May as well as its trade data, which is expected to show a decline in copper imports as unfavourable prices and high stockpiles erode demand.
China accounts for around 40 percent of refined copper consumption, although as much as 80 percent of imports are not used immediately by industry but by investors as collateral to secure cheaper loans.
“While we are looking for a technical rally going into the weekend, we would stay calm as there remain many issues on the table which will serve to cap prices in the medium term,” RBC Capital said in a note.
Tin was at $19,500 in official rings from $19,950. A lack of nearby supply has propelled cash prices to the loftiest in nearly two years against the three months contract, trading at a premium of $80.
Zinc, used in galvanising was at $1,878 from $1,909 on Thursday's close while battery material lead was bid at $1,900 from $1,917, with the price differential narrowing in recent days.
Aluminium traded in rings at $1973 from $1,992. It reached its lowest since December at $1,965 on Thursday. Nickel raded at $16,405 from $16,595 a tonne recovering from 2.5 year lows near $16,000. - Reuters