Copper rose about 1 percent on Thursday as risk appetite improved and the euro strengthened after a European Central Bank official suggested the bank was ready to purchase more debt, easing some worries about a debt crisis affecting the euro zone.
Benchmark copper on the London Metal Exchange was at $8,125.75 by 12:07 SA time, up about 1 percent from a close of $8,040
on Wednesday, when it fell as low as $8,018, its weakest since January 16.
Capping gains though Italian three-year borrowing costs rose more than a full percentage point at an auction on Thursday, and
Italy slightly missed its maximum planned amount of 3 billion euros for this bond.
ECB Executive Board member Benoit Coeure on Wednesday said that the scale of market pressure on Spain was not justified given the reforms being undertaken by its government and the European Central Bank still has its bond-buying programme as an option.
“Overall the market sentiment is better,” said Eugen Weinberg, head of commodity research at Commerzbank.
“Risk appetite has come back: comments from the ECB executive signaled that the bank could intervene with further release of credit; Chinese new loans data was significantly better than expected and car sales data showed an improvement.”
China's bank lending trumped forecasts to spike to 1.01 trillion yuan ($160.1 billion) in March, a sign of fresh traction in Beijing's efforts to ease monetary policy and boost credit creation to support the cooling economy.
Car sales in China were up in March from a year earlier, rising 4.5 percent from the same month last year.
Strong car sales by European firms, mainly driven by Chinese demand also boosted sentiment.
BMW, the world's largest premium carmaker by volume, enjoyed its highest ever first quarter demand on the back of March sales that broke all previous records as its three largest markets posted double-digit growth.
China overtook the United States as the group's largest single market in the first quarter.
CHINESE GROWTH
“Given the broad based strength across markets with equities showing gains and metals rebounding, it does look as though the markets have put aside the recent concerns about data and Spain's debt problems,” Fastmarkets said in a research note.
“As such, we would not be surprised to see further strength in the base metals in the short term, but would keep a wary eye on developments in EU debt. On balance we still feel the base metals will work lower over the medium term.”
Attention is now focused on China's first-quarter GDP figures, due out on Friday morning.
The World Bank has lowered its forecast for China's 2012 economic growth to 8.2 percent from 8.4 percent previously, reinforcing the view that China is set for its slowest annual growth in a decade.
Slower growth in China however, would not necessarily be negative, analysts say, as it makes monetary easing more likely.
Nonetheless, weaker copper demand and raising inventories in China remain one of the main concerns for investors.
Inventories of copper in warehouses monitored by the Shanghai futures Exchange have quadrupled since the beginning of the year, which might suggest sluggish consumption.
In other metals, tin was at $22,580 from $22,425 at the close on Wednesday.
Indonesia, the world's top exporter of thermal coal and refined tin and a large nickel producer, should quickly impose a tax on mining exports, the industry minister said on Thursday in comments likely to worry miners.
A powerful earthquake struck off the coast of northern Indonesia this week killing 5 people.
“The major earthquake does not appear to have caused any serious damage to the mining infrastructure, so its impact on prices is more of a psychological nature and should be short-lived,” Commerzbank said in a note.
Zinc, used in galvanizing was at $2,009.25 from $1,995; battery material lead was at $2,057.50 from $2,053 and aluminium was at $2,101 from $2,099.
Nickel was at $18,176 from a last bid of $18,100 on Wednesday. - Reuters