Copper prices gained nearly 2 percent on Friday, tracking European equities higher on improving sentiment about global economic prospects before U.S. payrolls data. The data, due at 1230 GMT, will give further clues on the battered economy, which has shown signs suggesting the worst may be over. The optimism has boosted global markets and sent copper to a three-week high on Thursday.
Copper for three-months delivery on the London Metal Exchange rose to $4,770 a tonne at 1000 GMT, compared with $4,715 a tonne at the close on Thursday.
"Glimmers of recovery indicators have led to optimism," said analyst Carl Firman at UK-based Virtual Metals. "This whole optimism is driving the entire base metals complex," he said, adding that copper has been tracking equity markets. European shares climbed higher after the results of stress tests on U.S. banks showed no nasty surprises, while the dollar fell against a basket of currencies, making metals cheaper for local currency holders.
The metal, used extensively in construction, has doubled in value since the start of the year on the view that falling inventories signalled that a recovery in demand is on the way.
Virtual Metals' Firman doubted that.
"Why are refined copper imports at a record in March ? Is this demand ? I think this is restocking, this is arbitrage trade and the fact that scrap copper supply has dwindled. All these factors lead to more refined copper into China. But it is not real demand, at least not as high as indicated," he said.
Imports of refined copper to China, the world's top consumer of the metal, rose to a record high in March, as the inventories on the LME dropped by some 30,000 tonnes.
On Friday, inventories dropped another 4,900 tonnes to 389,000, the lowest level since mid-January, while cancelled warrants -- material tagged for delivery -- were slightly lower at 72,925 tonnes from Thursday's 74,875 tonnes.
In addition to analysts doubting a recovery in China, figures also show an easing in the physical market.
Physical premiums for LME metal in Shanghai have fallen by a third, to around $150 a tonne above the London Metal Exchange cash price, while the arbitrage has narrowed to 850 yuan from 1,045 yuan two weeks ago.
"Domestic physical premiums are easing, the spread between nearby and futures contracts is narrowing, as is the spread between London and Shanghai prices," Standard Chartered analyst Judy Zhu said, adding that large imports in the first quarter may have helped ease the tightness.
Copper inventories monitored by the Shanghai Futures Exchange rose 45 percent from a week earlier to 27,690 tonnes on Thursday. Aluminium stockpile rose 7 percent to 166,650 tonnes.
"But the rally might turn and we could see another move lower," Pervan said, adding that a potential down leg would probably bottom out above February's lows around $3,100.
"I doubt it will get below $3,500... Our Chinese guys are quietly optimistic but our U.S. and European outlook has me a little more bearish."
Tin rose to $14,200 from $13,900. Tin has jumped 13 percent this week and prices surged to a near six-month high at $14,249 in the previous session on the back of short-covering and fund buying.
A dominant position controlling between 80 and 90 percent of cash warrants in LME warehouses means the metal is in backwardation -- or a premium for nearby material over the three-month contract -- of $220, versus a premium below $100 in mid-April.
Aluminium stood at $1,569 a tonne from $1,568. Stocks of aluminium rose by 13,825 tonnes to hit a record high of about 3.9 million tonnes.
Lead rose to $1,480 from $1,460, while zinc was at $1,589 from $1,583. Nickel gained to $13,376 from $13,295, tracking a 4.7 percent rise in the previous session.
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